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Cost  Keeping  Short  Cuts 


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Klllllllllllllllllllllllllllllllllllllllliillllllllllll^^ 
A  Cost  Department  where  it  is  recognized  that  a  clerk's  time  is  worth  money 


Cost  Keeping  Short  Cuts 

Prepared  from 

Experiences  in  Many  Lines 

of  Business 


Illustrated 


Detroit,  Michigan,  IT.  S.  A. 
Burroughs  Adding  Machine  Company 

"  mi 


Hf 


Copyright,  1911,  by 
BURROUGHS  ADDING  MACHINE  COMPANY 

of  Detroit,  Michigan,  U.  S.  A. 

All  privilege  of  reproducing  illustrations  or 

letterpress  expressly  reserved 

by  the  publishers 


First  Edition  July,  1910 
Second  Edition  May,  1911 


)-'*' 


Arranged,  Written  and  Illustrated  by  the  Departments  of  Systeni 
Service  and  Advertising 


To  the  Business  Man 

Who  Wants  to  Know  the  True  Value  of  Anything 

He  Does  or  Buys  or  Sells,  this  Little  Book 

is  Respectfully  Dedicated 


254076 


Here  again  I  would  venture  to  utter  a  word  of 
caution  to  business  men.  Let  them  study  their  own 
affairs  frankly,  and  face  the  truth.  If  their  methods 
are  extravagant,  let  them  realize  the  facts  and  act 
accordingly.  One  cannot  successfully  go  against 
natural  tendencies,  and  it  is  folly  to  fail  to  recognize 
them.  It  is  not  easy  for  so  impressionable  and 
imaginative  a  people  as  we  Americans  are  to  come 
down  to  plain,  hard  facts,  yet  we  are  doing  it  without 
loss  of  self-esteem  or  prestige  throughout  the  worlds 
John  D.  RockefiJLler. 


BY  WAY  OF  INTRODlJCriOMv.  ;•:(:%;:/ 

THE  first  edition  of  Cost  Keeping  Short  Cuts  was 
issued  not  quite  a  year  ago  in  response  to  what  we 
believed  to  be  a  well  defined  interest  among  busi- 
ness men  in  cost  finding.  That  our  belief  was  well 
founded  in  fact  has  been  verified  by  the  cordial  reception  , 
given  the  book  and  the  rapidity  with  which  our  supposedly 
ample  supply  has  been  exhausted.  Requests  for  copies 
poured  in  from  all  quarters,  making  this  second  edition 
necessary  within  nine  months  of  the  first.  We  have  taken 
advantage  of  the  reprint  to  correct  a  few  errors  which 
crept  into  the  first  edition,  as  well  as  to  amplify  the  book 
where  experience  has  shown  such  amplification  necessary 
or  valuable. 

The  merit  of  Cost  Keeping  Short  Cuts  has  been 
well  attested  by  the  number  and  warmth  of  the  appre- 
ciations coming  to  us  through  the  mails.  Perhaps  the 
greatest  compliment  paid  the  book,  however,  has  been  its 
adoption  by  a  number  of  schools  and  colleges,  including 
one  of  the  leading  universities  as  an  authoritative  text 
book  on  costs,  as  well  as  by  the  successful  application  of 
its  principles  by  a  large  number  of  manufacturers.  If 
the  second  edition  continues  to  receive  the  same  degree  of 
favor  and  proves  of  the  same  value  to  its  readers,  we  shall 
be  more  than  repaid  for  the  expense  of  its  production. 

The  whole  matter  started  some  time  ago  when  we  were 
asked  to  make  a  special  machine  for  a  manufacturer  who 
thought  it  took  too  much  time  to  handle  his  cost  figures 
by  hand.  We  studied  his  conditions.  We  made  him  a 
Burroughs  machine  which  got  so  much  greater  efficiency 
at  such  a  reduction  in  cost,  that  we  were  led  by  his 
enthusiasm  to  further  investigate  the  whole  subject  of 
cost  finding. 

We  had  not  gone  far  before  we  found  several  very 
surprising  things: 


(a)  I'hul  American  business  men  were  just  beginning 
to  be  interested  in  costs. 

(b)  That  they  apparently  were  not  much  beyond  the 
inquiry  stage. 

(c)  That  the  practical  information  on  the  subject  of 
cost  finding  was  both  meagre  in  quantity  and  questionable 
in  authority. 

From  among  thousands  of  good  friends,  users  of  our 
machines,  without  whose  suggestions  this  book  would 
have  been  impossible,  we,  however,  obtained  much  useful 
experience  data.  An  often  repeated  suggestion  to  "go 
ahead  and  get  other  experiences  and  then  let  us  also  have 
the  benefits,"  caused  us  to  arrange  the  material  in  form  for 
publication. 

This  book  is  the  spoil  of  that  little  journey  into  Cost 
Land. 

Theory,  in  its  objectional  sense,  has  but  little  place 
in  what  follows.  The  offerings  are  hot  from  the  crucible 
of  everyday  business  practice. 

One  word,  particularly  to  the  technical  reader.  You 
will  find  this  book  fundamental  and  elementary.  It  is 
our  aim  to  have  it  so.  We  hope  you  will  find,  however, 
what  we  have  tried  earnestly  to  put  here — a  few  helpful 
suggestions. 

If  you  find  that  it  awakens  inquiries  and  questionings 
that  you  would  like  to  have  answered,  will  you  not  write 
Us  fully? 

We  may  not  be  able  to  answer  everything  you  ask.  ^j 
We  are  not  cost  experts. 

It  may  be,  however,  that  we  can  send  you  a  form  or 
an  experience  that  so  nearly  fits  your  problem  that  you 
will  feel  repaid  for  your  trouble  in  writing.  Certainly  we 
shall  be  glad  to  be  of  such  service  to  you. 

Burroughs  Adding  Machine  Company, 
Detroit,  Michigan. 
May,  1911. 


CONTENTS 

Chapter  I— The  Profits  Made  By  Savings. 
II — Putting  in  a  Cost  System. 
Ill — Some  Systems  of  Paying  Wages. 
IV— The  Day  Rate  Wage  Plan. 
V— The  Piece  Work  Wage  Plan. 
VI— The  Differential  Rate  Wage  Plan. 
VII— The  Premium  Wage  Plan. 
VIII— The  Bonus  Wage  Plan. 
IX — Profit  Sharing  and  Stock  Distribution  Plans. 
X — Judging  the  Cost  Keeping  Requirements  of  a 

Factory. 
XI — Handling  Material — Perpetual  Inventory 
Suggestions. 
XII — Handling  Labor  Costs. 
XIII — Indirect  Expense  or  Burden. 
XIV — Distribution  of  Burden. 
XV — Some  Forms  Used  in  Cost  Systems. 
XVI — Final  Disposition  of  Cost  Figures. 
XVII — Cutting  the  Cost  of  Keeping  Costs. 
XVIII — How  the  Burroughs  Helps  the  Cost  Keeper. 
XIX — System  Used  in  the  Burroughs  Factory. 
XX — Information  for  the  General  Manager. 


Born,  January  28th,  1858.    Died,  September  14th,  1898 
The  Inventor  of  the  Burroughs  Adding  and  Listing  Machine 


CHAPTER  I 
The  Profits  Made  by  Savings 

NOT  long  ago  a  keen-minded  writer  on  business 
subjects  said,  "During  the  next  few  years  some  of 
the  tidiest  profits  in  American  industry  will  be 
saved  out  of  operations.  Heretofore,  much  of  our  profit 
has  been  made.  But  saving  profit  is  a  different  thing 
altogether."* 

That  is  the  keynote  of  the  remarkable  interest  in 
manufacturing  and  cost  of  production  systems,  which 
has  appeared  since  1905. 

A  nation  of  born  salesmen  and  advertisers,  we  have 
heretofore  solved  the  problem  of  making  more  profits 
by  getting  more  sales.  Competition  has  now  forced  us 
to  realize  that  an  increase  of  advertising  and  selling  expense 
will  not  continue  to  increase  the  business  in  direct 
proportion  to  the  increase  of  expense. 

The  corner  grocery-man  who  some  morning  finds  a 
competitor  on  the  opposite  corner,  is  forced  to  realize  the 
introduction  of  a  new  element.  The  new  arrival  advertises 
and  employs  the  best  salesmen  and  prices  his  goods  at  less. 
The  old  grocer  finds  his  old  trade  gradually  slipping  away. 

Such  conditions  must  be  met  not  only  by  advertising 
and  good  salesmanship,  but  he  must  go  a  step  further. 

It  means  better  systems  of  bookkeeping,  closer  inven- 
tories, more  careful  checking  of  every  item  of  income 
and  outgo,  more  accurate  methods  of  knowing  what  each 
clerk  produces — in  short  the  old  grocer  must  decide  to 
know  what  it  really  costs  him  to  sell  a  peck  of  potatoes, 
in  order  to  make  the  right  price. 

The  same  principle  rules  business  in  all  lines.     Cost,  / 
more  than  price,  fixes  profits.     The  public  fixes  the  price  ♦ 
it  will  pay.     The  dealer  may  keep  it  high,  but  the  public 
fixes  the  limit,  low  or  high,  of  what  that  price  will  produce. 

♦James  H.  Collins,  'The  Easiest  Profits,"  Saturday  Evening  Post,  March  26, 1910. 

11 


COST    KEEPING    SHORT    CUTS 

Profits        The  merchant  may  cut  his  cost  as  far  as  his  ingenuity. 
Savings  ^^^  ^^^  manufacturing  or  mepchandising  abiUty  will  take 
him.     He  can  only  make  the  difference  between  what  the 
public  will  pay  and  what  he  saves  on  the  costs. 

So  vital  a  thing  as  keeping  the  cost  and  the  price  as 
widely  separated  as  possible,  would  seem  to  call  for  the 
best  thoughts  of  the  most  expert  business  man. 

But  it  hasn't. 

In  fact  the  whole  subject  of  costs  is  a  wilderness  of 
figures  filled  with  more  or  less  significant  facts,  which, 
to  the  average  American  business  man,  cost  too  much 
to  catch. 
Balance  Many  manufacturers  depend  on  their  balance  sheets 
Prices  ^^  determine  cost,  and  their  competitors  to  fix  price. 
This  is  guesswork  of  the  rankest,  most  treacherous  and 
deceiving  sort.  Even  the  street  fakir  selling  collar  buttons 
knows  what  his  costs  are,  and  in  that  respect  knows  more 
than  some  large  enterprises  who  really  know  surprisingly 
little  about  how  much  it  costs  .to  put  their  output  down 
at  the  point  of  final  delivery. 

Many  a  retailer  doing  a  business  of  »^50,000  a  year  will 
tell  you  that  **a  cost  system  is  only  for  manufacturers." 

The  wholesaler  and  jobber  thinks  of  costs  in  a  lump 
sum  as  expenses  in  his  balance  sheet. 

Another  manufacturer  calmly  works  out  his  business 
plans  on  general  assumptions  of  facts  about  what  his 
product  costs  him. 

It  has  been  well  said  that  the  average  business  execu- 
tive fails  to  get  more  than  a  small  fraction  of  the  vital 
facts  and  statistics  that  he  should  have  to  intelligently 
control  the  activities  of  a  business. 

The  desire  to  dodge  the  expense  of  the  necessary 
system  that  will  bring  such  vital  statistics  to  the  executive 
desk  has  created  this  condition. 

Any  efficient  accounting  system  should  be  an  orderly 
and  logical  arrangement,  by  simple  processes,  of  the  facts 


COST    KEEPING    SHORT    CUTS 

and  figures  of  a  business,  so  that  it  may  concentrate  into, Profits 
clear  and  concise  statements  a  complete  expression  of  the(  gatings^ 
activities  and  condition  of  that  business. 

Contrary  to  the  somewhat  prevalent  idea,  there  is  no 
inherent  complexity  in  system,  just  because  it  is  a  system. 
It  may,  however,  be  suggested  that  the  observance  of 
any  logical  routine  in  the  handling  of  business  is  so 
repugnant  to  the  training  and  style  of  some  business  men 
that  they  take  refuge  in  the  absurdity  that  "all  system 
is  red  tape" — with  the  often  painful  result  that  they  fail 
without  knowing  why,  therefore  being  denied  the  im- 
portant lesson  their  failure  could  have  taught  a  man  with 
a  more  analytical  mind. 

That  this  attitude  on  the  part  of  business  men  is  too  A  Fatal 
general  and  often  fatal,  is  generally  conceded  by  those 
whose  occupations  such  as  bankers,  lawyers,  judges, 
expert  accountants,  referees  in  bankruptcy,  etc.,  bring 
them  into  close  contact  with  the  facts  and  figures  side  of 
business  troubles  or  failures. 

How  many  retailers  and  wholesalers  and  even  manu- 
facturers have  to  wait  for  their  yearly  or  half  yearly 
inventory  to  find  out  if  they  have  made  or  lost  money? 
How  often  has  this  found  them  in  a  position  where  it  was 
too  late  to  do  anything  but  call  in  their  creditors. 

No  less  an  expert  on  costs  than  Mr.  J.  L.  Nicholson 
said  in  his  interesting  work  on  the  subject  of  costs: 
*'In  the  majority  of  enterprises  to-day,  the  profits  and 
losses  are  only  known  at  the  end  of  the  regular  fiscal  period, 
when  an  inventory  is  taken  and  the  books  closed;  and  even 
then  the  result  is  not  necessarily  correct,  inasmuch  as 
the  accuracy  depends  entirely  upon  the  correctness  of  the 
inventory,  which  there  is  no  means  of  checking  or  verify- 
ing in  the  ordinary  systems.  The  result,  whatever  it 
may  be,  appears  in  the  books  of  accounts  for  the  entire 
period  in  one  amount,  and  admits  of  no  verification  due 

*  "Nicholson  on  Factory  Organization  and  Costs,"  pp.  8  and  9. 

IS 


COST    KEEPING    SHORT    CUTS 

Profits  to  the  principle  involved.  There  are  two  important 
Savings  (questions  that  relate  to  this:  First,  are  the  results  ap- 
parently satisfactory;  second,  are  they  a  disappointment, 
and  a  surprise?  Let  us  take  up  the  first  question  by 
asking  one.  Should  a  result  in  gross  which  is  apparently 
satisfactory  be  accepted  without  question?  A  careful 
analysis  of  this  will  result  in  the  answer.  No.  There  is 
absolutely  nothing  in  the  profits  shown  in  this  manner  to 
indicate  whether  the  results  should  not  have  been  con- 
siderably more.  There  may  be  many  articles  made  at  a 
loss,  with  the  result  that  the  articles  upon  which  there  is 
a  good  margin  of  profit  have  been  paying  the  losses 
resulting  from  the  sale  of  the  other  class  of  products.  In 
taking  up  the  second  question,  the  first  query  that  arises 
naturally  would  be:  What  am  I  going  to  do  about  it? 
There  is  only  one  way  to  correct  the  fault,  and  that  is  to 
locate  it;  and  if  the  mass  of  detail  that  enters  into  the  pro- 
duction of  any  plant  is  buried,  owing  to  a  lack  of  records 
dealing  with  the  component  parts  of  the  product  during 
the  period  of  six  to  twelve  months  before  results  are 
obtained,  this  would  indicate  that  some  action  is  necessary 
in  providing  a  plan  that  will  admit  of  locating  or  deter- 
mining the  cause." 

Touching  on  a  similar  condition  of  the  business  mind 
another  writer  recently  said  in  a  popular  magazine :  "The 
business  world  is  of  three  different  opinions  on  this  subject 
of  cost  accounting,  two  of  them  wrong  and  the  third  right. 
"One  type  of  manufacturer  operates  with  little  cost 
accounting  other  than  his  annual  inventory,  and  main- 
tains that  a  cost  system  entails  too  much  trouble  and 
expense.  From  him  one  hears  the  familiar  joke  about 
Smith's  cost  system:  'Smith  had  experts  working  three 
months  installing  a  cost  system  at  his  plant,  and  since 
then  he's  been  busier  working  the  system  than  making 
goods.  Why,  it  costs  him  more  to  find  out  what  his 
product  costs  him  than  it  does  to  make  it!     Ha,  ha!' 

14 


COST    KEEPING    SHORT    CUTS 

"The  second  type  of  manufacturer  is  Smith,  who  has  System 
actually  become  so  absorbed  in  cost  accounting  that  he  g^^ 
is  trying  to  make  its  smallest  refinements  practical.     In 
many  a  mill  Smith  has  been  known  to  bring  in  experts  to 
find  out  exact  costs  on  a  small  job,  spending  more  for  the 
purpose  than  he  made  in  profit. 

"The  third  kind  of  business  man  is  the  one  who  strikes 
a  safe  middle  course,  taking  what  the  cost  experts  have 
to  give  him  and  applying  it  in  the  light  of  his  own  practical 
knowledge.  A  little  cost  accounting  and  a  little  common 
sense  make  a  combination  hard  to  beat." 

To  steer  a  middle  course  between  the  extremes  of  the 
impractical  system  visionary  who  strives  to  operate  a 
business  on  hard  and  invariable  lines  as  a  machine  is 
operated,  and  the  stone  blind  "practical"  man  who  never 
does  anything  unless  it  is  mouldy  with  precedent,  is, 
indeed,  a  hard  but  a  necessary  thing  to  do. 

It  is  believed  that  the  German  was  the  first  business 
man  to  understand  that  cheapening  the  cost  of  production 
opened  the  avenue  to  a  greater  and  more  profitable 
business. 

The  old  idea  was  to  keep  our  methods  a  secret,  on  the 
general  assumption  that  the  things  hidden  from  a  com- 
petitor were  the  things  that  made  us  big  and  successful. 

The  idea  of  overcoming  competition  was  to  have  so 
much  capital  that  we  were  able  to  lose  a  lot  more  money 
than  the  competitor  could  afford  to.  If  anybody  got  into 
competition  with  us,  the  process  was  to  freeze  him  out  by 
standing  the  loss  longer  than  he  could. 

This  was  before  the  science  of  accounting  was  applied 
to  the  matter  of  men's  labor;  before  we  realized  that  time 
was  money,  that  materials  were  money.  Just  as  soon  as 
we  grasped  the  idea  that  if  we  had  more  time  we  could 
make  more  money,  we  started  in  to  cut  down  the  amount 
of  time  we  had  to  give  to  any  one  particular  part  of  our 
work  by  getting  more  out  of  the  time.     We  could  then  sell 

15 


COST    KEEPING    SHORT    CUTS 

Profits  the  product  more  cheaply  because  we  had  put  less  time 
Sa\^ngs  (money)  into  it.     We   commenced   to   use   labor-saving 
machinery  because  it  was  time-saving  machinery,  which 
meant  money-saving  machinery. 

This  was  theory  that  worked. 
Theory!  All  theory  is  generally  the  product  of  experience  and 

it  in  turn  produces  experience,  a  sort  of  an  endless  chain. 

It  is  an  interesting  speculation  to  figure  out  how  cost 
accounting  came  into  use.  No  doubt  some  man  had  a 
theory  that,  if  he  kept  books  with  himself — not  only  with 
his  customers,  but  with  the  various  parts  of  his  business, 
with  all  his  workmen,  with  his  materials,  his  machines 
and  his  salesmen,  that  he  would  better  know  what  he  was 
doing. 

Some  men  are  frank  enough  to  admit  that  they  don't 
really  know  what  they  are  doing. 

On  the  one  side,  our  man  put  down  all  that  workman 
did,  and  on  the  other,  he  put  down  all  the  man  cost  him. 
At  the  end  of  the  year,  six  months,  or  every  month,  he 
could  cast  it  up  and  see  whether  he  was  getting  what  he 
was  paying  for  and  whether  that  workman  was  making  a 
profit  for  him. 

He  kept  books  with  the  raw  material  that  he  bought. 
He  found  what  raw  material  cost  and  where  it  went. 
Then  he  found  what  it  cost  to  manage  the  men  and  the 
materials.     Cost  of  management  was  important. 

If  every  workman  could  be  trusted  to  do  his  work  well 
without  oversight,  he  wouldn't  need  to  have  an  overseer 
or  foreman,  but  as  every  workman  has  to  have  a  certain 
amount  of  oversight,  the  employer  said,  "Here,  I  will 
distribute  that  cost  of  oversight  to  each  man  according  to 
his  importance  on  my  payroll.  If  he  makes  $5.00  a  day 
and  it  requires  $1.00  worth  of  oversight,  I  will  debit  that 
dollar  against  his  account." 

"This  also  applies  to  the  amount  of  material  he  uses. 
I'll  sell  the  material  to  the  workman  at  cost." 

16 


COST    KEEPING    SHORT    CUTS 

After  he  introduced  this  idea  of  keeping  books  with  Keeping 
himself  and  with  his  men,  he  found  that  while  most  of  ^th^ 
the  men  were  paying  him,  a  few  were  not.     He  began  to  Himself 
drop    the    unprofitable    men    and   put   in   better.      His 
standard  was  simple:  If  a  $5.00  man  over  there  was  pro- 
ducing good  work  at  a  profit,  he  made  the  $5.00  man  over 
here  work  up  to  the  other  fellow's  standard.     Before  he 
knew  it  he  had  the  whole  factory  working  up  to  a  higher 
pitch.     That  was  one  of  the  Cost  Findings. 

It  was  but  a  step  to  the  idea  that  he  should  keep  books 
with  his  fines  of  production.  He  soon  found  that  it  took 
a  lot  of  money  to  sell  certain  lines.  The  margin  was 
small  and  he  found  other  lines  were  more  profitable.  The 
result  was  he  cut  down  the  production  of  the  unprofitable 
and  increased  the  production  of  the  profitable.  Then  he 
saw  no  good  reason  why  he  shouldn't  keep  books  with  his 
heads  of  departments  and  his  salesmen.  And  so  all  along 
the  line  he  got  in  touch  with  the  real  meanings  of  the 
activities  of  his  business. 

Some  day  he  will  apply  the  cost  idea  to  his  clerical  . 
and  accounting  department. 

But  he  had  found  where  the  minutes  went  and  it  didn't 
take  him  long  to  realize  that  as  his  Cost  System  gave  him 
facts  and  figures  about  the  activities  of  his  business,  he 
was  fighting  competition  with  his  eyes  open.  He  knew 
what  he  could  do. 

All  of  this  required  system — a  system  which  needed 
the  people  who  operated  it  to  be  in  sympathy  with  the 
things  he  wanted. 

At  the  very  beginning  it  is  well  to  forget  all  about  the  Forget 
idea  that  "our  business  is  different."     We  find  that  there  jj^^ 
are  time  and  material  and  indirect  expense  in  every  manu- 
facturing   business.     It    doesn't    make    any    difference 
whether  we  make  candy  cones  for  the  school  children  of 
New  York,  or  locomotives  for  the  Siberian  railway.     The 

17 


COST    KEEPING    SHORT    CUTS 

Profits  whole  necessity  lies  in  tracing  the  time,  material  and 
Savings  iJidirect  expense  which  make  up  the  cost  of  doing  business. 

Just  as  soon  as  we  forget  that  "our  business  is  dif- 
ferent" we  begin  to  find  out  how  other  people  do  their 
work;  how  other  people  find  what  it  costs  them  to  do 
business.  That  is  where  we  are  to-day — we  are  seeking 
more  light  on  the  subject. 

Tearing  away  all  the  fine  spun  theories  of  the  profes- 
sional, the  fact  is,  having  pushed  price  to  the  limit  of  the 
public  acceptance,  greater  profits  now  lie  behind  us,  in 
pushing  costs  down  to  the  point  where  quality  and 
quantity  of  production  begin  to  be  affected. 

That  is  the  whole  philosophy  of  cost  keeping  in  a 
sentence.  Many  men  think  the  application  of  the  prin- 
ciple should  be  equally  simple — but  it  isn't  and  it  can't  be. 

All  the  complications  come  in  when  we  come  to  trace 
the  course  of  a  dollar's  worth  of  material  through  two 
hundred  and  fifty  hands  and  one  hundred  and  ten  opera- 
tions, to  the  completed  article. 

But  this  complexity  in  turn,  actually  works  out  in 
expert  hands,  into  some  very  simple  system  of  records, 
as  will  later  be  shown. 

Cost  accountants  sometimes  turn  up  most  unusual 
and  surprising  conditions  in  exceptionally  reputable  and 
apparently  well-regulated  business  households. 
A  Printer  A  printing  house  in  a  mid- western  city  had  long  been 
°Q^^  known  as  a  fine  catalog  house.  It  had  been  in  business 
since  the  time  of  the  proprietor's  grandfather.  The 
business  had  been  profitable.  The  present  proprietor's 
father,  son  of  the  founder,  had  put  in  a  poster  printing 
plant,  run  separately.  The  business  was  handled  through 
one  bookkeeping  department.  Catalog  plant  and  poster 
plant  were  running  night  and  day.  One  night  the  pro- 
prietor found  the  poster  plant  folders  working  overtime 
on  a  catalog  order. 

18 


COST    KEEPING    SHORT    CUTS 

"Do  we  charge  the  catalog  department  with  that  work  Profits 
and  does  the  poster  department  get  credit?'*  he  asked  of  Savings^ 
the  superintendent. 

"Oh  yes,  they  turn  in  tickets  for  it." 

The  young  proprietor  thought  it  over  that  night  while 
going  home. 

He  spent  the  next  day  going  over  the  tickets  for  last 
month's  business.  He  thought  he  saw  some  queer  things. 
He  called  in  a  cost  expert.  That  expert  finally  got  down 
to  the  detail  where  he  could  tell  what  it  cost  to  have  the 
"devil"  pull  a  galley  proof.  He  also  found,  among  other 
things,  that  the  catalog  plant  had  been  paying  poster 
department  losses  for  three  years.  Then  the  proprietor 
who  had  been  working  along  with  the  expert,  commenced 
to  hire,  fire  and  transfer.  The  old  foreman  and  henchmen 
of  the  house  made  some  gloomy  prophecies  of  the  awful 
things  that  were  going  to  happen  as  a  result  of  the  change. 

But  the  change  worked,  and  anything  is  good  when  it 
works. 

Cost  finding  is  not  a  series  of  formulas  like  that  which 
we  get  in  chemistry.  It  is  simply  systematized  processes 
of  finding  out  where  every  item  of  material  and  time  and 
expense  go  in  the  making  of  a  product,  or  in  the  process 
of  buying  and  selling  goods.  When  two  chemists  are 
asked  to  give  a  formula  of  water,  each  will  write  H2O — 
ask  two  hundred,  the  answer  would  be  the  same.  Chem- 
istry is  a  fixed  science. 

Ask  two  cost  accountants  what  goes  into  costs  and  A  Cost 
you  will  get  practically  the  same  formula: 

Cost  of  Material + Direct  Labor = Prime  Cost. 

Prime  Cost H- Direct  Factory  Expense = Factory  Cost. 

Factory  Cost + General  Expense = Cost  to  Make. 

Cost  to  Make  4- Selling  Expense  =  Cost  to  Make  and 
Sell. 

Cost  to  Make  and  Sell + Profit = Price. 

19 


t 

COST    KEE.PING    SHORT    CUTS 

Profits        That  is  the  formula  and  it  will  remain  the  same,  no 
Saving^  matter  how  many  cost  accountants  you  ask.     They  may 
phrase    it    differently,  but    the    essentials    will    remain 
the  same. 

Suppose,  however,  you  were  to  ask  a  hundred  chemists 
to  produce  water  according  to  the  chemical  formula.  A 
careful  checking  of  the  expenses  incident  to  the  manufac- 
ture of  a  gallon  by  each  of  the  hundred,  would  probably 
give  you  a  hundred. different  costs.  If  you  should  compare 
the  costs  you  would  get  at  the  man  who  made  the  cheapest 
gallon  of  water. 

Take  your  cost  formula  and  apply  it  to  your  product. 
Keep  a  careful  record  by  departments  and  men. 

You  will  get  a  line  on  departmental  and  man  efficiency 
that  will  open  your  eyes. 

Comparisons  are  necessary  if  you  would  get  a  just 
estimate  of  the  relative  activity  and  efficiency  of  your 
employes. 

After  all,  the  success  or  failure  of  any  business  is  a 
matter  of  the  quality  of  the  man-stuff  of  which  the 
business  is  made. 

You  can  figure  to  the  last  decimal  on  the  cost  of  your 
materials,  your  overhead,  your  rent  and  heat  and  light, 
know  exactly  what  it  is  going  to  cost  you  to  carry  $1,000 
in  loans  at  the  bank;  but  (and  this  is  just  as  important) 
what  does  it  cost  you  to  let  John  Jones  handle  your  green 
groceries;  or,  what  does  it  cost  you  to  let  Bill  Smith  do 
half  as  much  work  as  Sam  Perkins,  who  works  next  to  him 
in  your  machine  shop? 

Why  does  it  cost  you  $200  a  week  for  your  accounting 
department  when  your  competitors,  Fitzgerald.  &  Com- 
pany, handle  twenty-five  per  cent  more  business  on  $150.^ 

Why.? 
Why?         When  you  come  to  that  point  you  are  getting  in  the 
frame  of  mind  where  you  will  use  a  cost  system  as  it 
should  be  used — i.  e.,  as  a  means  to  make  profits. 

20 


COST        K    E    E    PING        SHORT        CUTS 

Referees  in  bankruptcy  will  tell  you  that  half  the  Profits 
failures   that   occur  in  periods   of   good  business   occur  Savings 
because  the  bankrupts  didn't  know  what  their  outputs 
cost  them;  they  hadn't  preserved  the  proper  distance 
between  cost  and  price. 

Too  many  prices  are  made  on  the  basis:  "Well,  if  he 
can  sell  it  for  that,  we  can."  Of  course,  that  doesn't 
follow  at  all. 

One  western  mill  recently  found  that  the  old  day -wage 
system  was  losing  money  for  the  firm,  because  the  price 
of  the  goods  was  fixed  by  the  consumer  and  the  workman 
fixed  the  cost. 

A  piece-work  wage  system  was  introduced.  A  limit 
was  fixed  on  the  cost  of  the  goods  with  an  eye  to  meet 
the  price  fixed  by  the  consumer.  The  system  created  a 
comfortable  margin  between  cost  and  price,  and  by  the 
system  the  tendency  was  for  the  margin  to  gradually 
grow  bigger  as  the  management  found  places  where  to 
economize  in  materials  and  time. 

It  is  such  simple  things  as  these  that  work  the  revolu- 
tions in  profits.     The  American  business  man  has  long  - 
neglected  his  office,  his  internal  organization,  in  favor 
of  his  selling  organization.     Times  are  forcing  a  change. 

We  have,  in  the  world's  greatest  and  wealthiest  nation, 
more  failures  than  in  any  other  nation.  The  vast  per- 
centage fail  for  *'lack  of  capital,"  "for  want  of  knowledge 
of  the  business" — so  Dun  and  Bradstreet  tell  us.  The 
commercial  lawyers  tell  us  that  the  principal  "lack"  is 
a  practical  knowledge  of  what  it  costs  to  do  business. 

If  there  is  any  place  where  the  old  adage — "Be  sure  An  Old 
you  are-right,  then  go  ahead,"  means  something,  it  is  in 
the  matter  of  fixing  prices. 

Without  accurate  costs  you  cannot  intelligently  and 
accurately  fix  price,  is  as  plain  as  a  pike-staff. 

The  principal  difficulty,  however,  has  lain  in  the 
handling  of  the  time  and  materials.     The  records  required 

21 


COST    KEEPING    SHORT    CUTS 

Profits  so  many  hands  and  heads  that  the  manufacturer  preferred 
Savings  ^^  chance  it,  and  dismissed  the  whole  idea  with  the  futile 
pun:  "It  costs  too  much  to  know  what  it  costs." 

Like  most  generalities,  however,  this  is  dangerous. 
Again,  it  is  no  longer  true.  Since  the  introduction  of  the 
time  clock  for  recording  the  gross  hours  of  labor;  the 
elapsed  time  recorders  by  which  each  workman  records  in 
plain  figures  on  each  card  the  time  he  has  actually  been  at 
work;  and  finally,  the  Burroughs  Cost  Machines  by  which 
the  time,  the  value  of  materials,  and  the  costs  may  be 
added  and  listed  on  wide  sheets  from  the  individual 
records,  and  all  other  handling  of  figures  done  at  a  speed 
of  three  to  five  times  as  fast  as  formerly  done  by  the  most 
expert  clerks,  the  expense  of  maintaining  a  cost  system 
has  lost  most  of  its  terrors. 

Business  men  are  now  turning  to  the  subject  with  a 
renewed  interest  further  energized  by  the  thought  that 
it  is  better  to  be  safe  than  sorry. 


CHAPTER  II 
Putting  in  a  Cost  System 

NEVER  FORGET  THE  MAN,"  ought  to  be 
written  in  large  letters  over  the  desk  of  the  man 
who  is  responsible  for  the  systems  used  in  any 
kind  of  business. 

Too  many  systems  are  made  on  the  assumption  that 
the  men  working  them  are  reasoning,  thoughtful  and 
analytical. 

Most  men  are  none  of  these  things.  In  fact,  even  most 
of  those  men  who  are  paid  to  think  are  not  analytical; 
their  thinking  is  mainly  remembering  how  a  thing  was 
done  before,  and  then  doing  it  again. 

Begin  a  system  with  yourself. 

Decide  that  you  are  going  to  be  honest  with  yourself. 

The  proper  cost  system  registers  the  will  of  the -pro- 
prietor. It  goes  as  far  as  he  will  go.  Some  managers 
don't  want  to  know  too  much  about  their  business.  It 
is  surprising  how  much  more  common  than  may  be  sup- 
posed, this  failing  is.  The  average  man  approaches  a 
cost  system  from  the  wrong  angle.  He  doesn't  want  to 
find  that  he  has  not  been  making  as  much  money  as  he 
should,  because  that  reflects  on  his  ability  as  a  manager. 
He  should,  on  the  other  hand,  try  to  find  out  where  he  is 
not  making  as  much  as  he  should  in  order  that  he  may 
remedy  the  oversight.  In  the  first  place,  then,  determine 
to  find  out  what  it  has  cost  you  to  produce  and  sell  your 
product  for  one  given  period.  That  will  open  your  eyes 
to  losses  and  perhaps  unnamed  profits.  In  the  second 
place,  decide  that  you  will  put  in  a  system  to  find  out 
what  your  future  product  will  cost  you. 

Get  at  the  costs;  don't  flinch  or  fumble,  but  go  after 
and  get  the  whole  truth  about  yourself  and  your  business. 

23 


COST    KEEPING    SHORT    CUTS 

Putting        You  may  have  some  pet  method  of  handhng  tools  in 

Q^^^  the  factory,  charging  the  salesmen's  expense,   dividing 

System  territories,  handling  the  accounting  detail  in  the  office. 

You  think  it  is  efficient  and  profitable.     It  may  not  be. 

Be  prepared  to  see  it  thrown  on  the  rubbish  heap. 

Make  your  superintendent  and  your  men  see  the  new 
ideas  in  the  same  way.  Employes  are  never  glad  to  see 
changes.  They  don't  know  what  they  mean,  and  being 
ignorant  of  the  purpose  they  generally  imagine  it  means 
the  worst  results  to  themselves.  Superintendents,  man- 
agers who  have  been  responsible  for  the  systems  you  have 
in  use,  would  be  more  than  human  if  they  did  not  resent 
the  "new  f angled  ideas"  that  seem  to  be  revolutionary 
and  mean  an  indictment  of  their  own  ability. 
Consider  the  man. 
A  Story  A  man  told  a  story  which  shows  the  value  of  this  man- 
knowledge  so  essential  to  the  success  of  a  cost  keeping 
system : 

"The  management  of  a  large  machine  works  came 
down  with  the  high-speed  steel  fever,  a  malady  that  needs 
a  little  description. 

"High-speed  steels,  made  for  cutting  tools  in  metal 
works,  are  so  superior  to  ordinary  carbon  steels  for  certain 
work  that  from  forty  to  one  hundred  per  cent  increase  in 
production  often  follows  immediately  upon  their  intro- 
duction in  a  machine  shop.  They  make  it  possible  to 
run  machines  faster,  cut  more  deeply  and  speed  the  work 
all  around. 

"This  particular  management  tried  high-speed  steel 
and  found  that  its  costs  could  be  reduced  at  least  seventy 
per  cent.  That  meant  almost  a  revolution  in  prices  and 
competitive  conditions.  An  elaborate  cost  system  was 
worked  out,  the  new  steels  applied  everywhere,  and 
several  contracts  taken  on  terms  that  would  have  meant 
bankruptcy  under  the  old  scheme  of  things. 

24 


COST    KEEPING    SHORT    CUTS 

"And   before    those   contracts    were,  completed   the  Putting 
works  did  face  bankruptcy.  q^^^ 

"For  the  new  cost  system  wouldn't  operate  itself.  System 
Workmen  had  not  been  taught  to  temper  the  new  steels, 
a  delicate  process.  No  provision  had  been  made  for 
grinding  tools  to  exact  angles  in  a  special  department. 
There  was  an  insufficient  supply  of  tools  for  the  new  con- 
ditions, leading  to  losses  of  time.  Worst  of  all,  employes 
were  suspicious  of  the  whole  innovation  because  it  had 
not  been  clearly  explained  to  them  and  they  feared  it  was 
meant  to  put  them  at  some  disadvantage.  The  cost 
system  was  only  a  theory  at  that  point.  It  had  never 
been  adjusted  to  the  human  equation,  and  it  took  more 
than  a  year  of  patient  work  among  the  men  in  different 
departments  before  such  adjustment  was  brought  about, 
making  the  theory  fact.'' 

The  man  power,  without  which  a  system  is  simply  a 
theory  on  paper,  had  not  been  considered. 

Managers  frequently  go  at  this  phase  of  the  question 
in  a  way  that  leads  to  needless  loss.     At  the  bottom  every 
American  workman  is  of  the  right  stuff.     That  is  not  • 
sentiment  or  patriotism;  it  is  a  plain  statement  of  ex- 
periences. 

When  you  throw  aside  your  general  managership,  and  Breeds 
get  down  on  the  floor  and  talk  to  these  men  as  man  to  man, 
you  can  generally  get  them  into  line  with  almost  any 
plan  of  betterment.     It  is  the  formal  order  like  this  that 
makes  it  easy  to  form  unions  and  call  strikes: 

"On  and  after  this  date  every  workman  in  this  factory  will 
be  put  on  a  piece-work  basis,  as  per  schedule  in  the  hands  of 
each  foreman. 

By  order  of  the  Company, 

John  James  Smith, 

General  Manager," 

Go  back  over  the  labor  troubles  in  your  district  and 
you  will  find  a  number  dating  from  just  such  if-you-don't- 
like-it-get-out  orders. 

25 


COST         KEEPINGSHORT         CUTS 

Putting        Such  orders  come  from  a  man  who  fails  to  realize  that 
^g^  every  machine  he  has  in  his  factory,  every  part  of  his 
System  product,  every  sale  he  makes,  every  dollar  of  his  invest- 
ment depends  for  its  efficiency  on  a  man. 

Contented  men  give  a  better  result  than  mere  men. 

Enthusiastic  men  give  a  better  result  than  mere  con- 
tented men. 

Men  with  pride  in  their  work,  with  enthusiasm  in  their 
blood,  and  loyalty  in  their  hearts  can  whip  the  world. 

That  sounds  like  sentiment.  So  it  is — but  the  stuff 
that  rules  the  world,  certainly  has  a  place  in  ruling  a 
business. 

When  you  get  down  to  the  men,  show  them  that  you 
trust  them,  tell  them  what  you  expect  them  to  do,  and 
that  the  system  of  costs  is  simply  to  protect  them  and 
you  and  your  stockholders.  You  wish  to  place  responsi- 
bility where  it  belongs,  and  will  pay  for  it  in  proportion 
to  its  worth.  Most  of  them  will  try  to  deserve  responsi- 
bility, and  you'll  find  it  pays  to  get  rid  of  the  others. 
Manstuff  Don't  forget  the  manstuff  on  which  your  system 
depends.  This  task  is  yours.  Fix  in  your  own  mind 
clearly  what  you  want  a  system  for,  what  you  want  it  to 
do,  and  why  you  want  it. 

The  general  advantages  of  any  cost  system  are: 

First — To  reduce  the  costs. 

Second — ^To  increase  production. 

Third — ^To  introduce  machines  to  do  work  hitherto 
done  by  hand. 

Fourth — ^To  equalize  the  output  in  each  department. 

Fifth — ^To  serve  as  a  guide  to  selling. 

Sixth — ^To  serve  as  a  guide  to  pricing. 

Seventh — ^To  serve  as  a  basis  to  judge  the  product  and 
efficiency  and  diligence  of  the  workmen. 


COST    KEEPING    SHORT    CUTS 

Eighth — To  place  the  employer  in  a  position  to  get  Putting 
a  safe  basis,  independent  of  the  judgment  of  the  foremen  q^^ 
of  the  different  departments,  on  which  to  reward  the  System 
dihgent  and  to  get  rid  of  the  lazy. 

Ninth — To  act  as  a  moral  stimulus  to  every  workman 
and  to  insure  fair  distribution  of  reward  to  all. 

Not  one  of  these  things  can  be  handled  with  accuracy 
and  safety  unless  you  have  a  cost  system. 

Starting  a  system  is  important,  where  to  start,  how 
and  when,  for  these  take  the  time  of  men  from  a  business 
that  must  be  kept  going  while  it  is  being  doctored. 

The  expert  has  found  his  opening  here. 

The  expert  always  pays  his  way.  The  doctor,  the 
lawyer,  the  dentist  are  all  unnecessary,  but  they  are 
economizers  of  life,  liberty  and  happiness.  They  get  more 
for  us  than  we  could  get  for  ourselves. 

It  is  the  same  way  with  cost  keeping.  There  are  men 
who  have  made  a  special  study  of  cost  keeping.  The  cost 
keeper  is  generally  an  outsider  who  has  made  a  study  of 
costs  as  applied  to  manufacturing,  wholesaling  or  retailing. 
There  are  experts  who  specialize  on  certain  kinds  of  costs,- 
such  as  foundry  costs,  costs  in  specialty  manufacturing  and 
costs  in  department  stores,  and  so  on  through  a  score 
of  lines. 

The  cost  keeper  should  be  more  than  a  bookkeeper.  The 
while  some  bookkeepers  have  made  excellent  cost  keepers.  Keeper 
He  must  have  an  ability  for  analyzing  processes,  a  grasp  of 
manufacturing  detail,  and  a  knowledge  of  accounting,  and 
then  the  final  test  of  his  ability  as  a  systematizer  comes  » 

in  an  ability  to  mould  these  things  into  a  simple,  workable 
system. 

In  its  workability  will  be  shown  the  value  of  knowing 
human  nature.  Each  record  required  of  a  workman 
must  appear  to  lead  somewhere,  say  something,  be  com- 
plete. To  ask  a  man  to  set  down  some  apparently  need- 
less figures  for  an  unknown  purpose,  is  to  make  him 

27 


COST         KEEPING         SHORT         C    UTS 

Putting  indifferent  and  inaccurate,  and  that  is  to  fail  to  get  the 
(^Qg^  facts  in  so  many  cases  as  to  seriously  interfere  with  the 
System  accuracy  of  the  final  results. 

Business  is  enough  of  a  gamble  even  after  a  cost  system 
has  been  installed  without  encouraging  any  one  to  guess 
at  any  part  of  the  data  it  obtains. 

There  are  two  ways  to  find  costs:  First,  estimated 
costs;  second,  absolute  costs. 

The  process  of  estimating  costs  leads  at  best  to  self- 
deception.  It  argues  a  decision  to  install  a  cost  system 
that  shall  give  you  a  knowledge  of  what  the  items  of  your 
product  actually  cost  you  to  produce,  and  then  side  step- 
ping to  introduce  guesswork  into  the  result. 

It  is  a  compromise  that  inevitably  hurts  more  than  it 
helps.  It  is  not  a  system  in  any  of  its  crude  and  imperfect 
parts.  It  is  just  a  process  of  recording  human  guesswork, 
and  has  no  more  right  to  be  called  a  system  than  a  process 
of  keeping  books  by  which  you  guess  at  the  amount  of  the 
items  you  enter  to  your  debit,  and  speculate  as  to  how 
much  your  customers  should  pay  you. 
Absolute  The  system  by  whfch  absolute  costs  are  obtained  is 
an  honest  attempt  to  get  at  the  real  amount  of  labor,  the 
real  amount  of  material  put  into  any  piece  of  work.  The 
ideal  set  before  any  costkeeper — dealing  with  absolute 
costs — is:  "Get  the  absolute  facts  and  figures  about  the 
various  activities  of  the  business."  Approximations, 
guesswork,  estimates  and  speculations  of  any  kind  are 
/  barred,  and  in  their  place  is  an  ever  present  single  minded 

desire  to  be  absolutely  accurate. 

It  must  be  realized  that  the  value  of  the  right  system 
lies  in  the  difference  between  average  and  maximum 
efficiency,  between  what  is  done  by  men  who  are  left 
largely  to  their  own  devices,  or  the  uncertain  moods  and 
ebbing  and  flowing  energies  of  foremen,  and  men  who 
feel  the  constant  spur  of  working  up  to  a  standard. 


COST    KEEPING    SHORT    CUTS 

The  business  man  who  thinks  up  to  such  n  standard  Putting 
realizes  that  nothing  happens  in  this  world;  that  success  (^^^^ 
or  failure  does  not  come  as  a  result  of  good  or  evil  fortune.  System 
Back  of  them  is  a  cause.  Back  of  all  success  there  is  a 
good  and  sufficient  reason.  The  executive  with  a  vision 
realizes  that  he  must  get  at -these  causes  and  understand 
them.  As  he  hunts  for  them  amid  the  activities  of  his 
business,  he  is  hospitable  to  the  claims  of  all  theories,  of 
new  machines,  of  time  saving  devices  in  oflace  or  factory. 
Nothing  is  poor  in  his  eyes  until  it  has  been  found  wanting 
after  a  trial.  No  theory  is  bad  just  because  it  is  a  theory. 
He  knows  that  theory  is  the  egg,  practice  is  the  chicken. 
But  in  this  hunt  for  details  that  shall  show  him  where  and 
whence  to  find  the  things  that  make  or  mar  profits,  the 
manager  finds  that  these  very  details  are  the  things  that 
palsy  the  hand  and  the  mind.  He  must  deputize — hence 
the  costkeeper. 

Details  will  not  come  of  themselves  to  the  executive: 
the  executive  must  go  after  the  details,  and  he  does  this 
by  means  of  a  system  through  which  are  recorded  all  the 
time  and  materials  used,  and  then  a  systematic  distribu- 
tion of  these  figures  to  certain  divisions  of  processes  or 
expenses,  which  he  knows  to  be  the  source  of  the  greatest 
possible  loss  to  him. 

He  knows  that  profits  will  take  care  of  themselves  Profits 
when  he  has  taken  care  of  the  losses.     That  is  the  execu- 
tive's part. 

Many  cost  experts  have  found  that  a  graphic  charting 
of  the  business  helps  to  a  proper  analysis  and  aids  in 
placing  the  matter  in  a  proper  light  before  those  who  will 
operate  the  system. 

First,,  chart  all  the  various  departments  of  the  busi- 
ness; under  each  department  write  exactly  what  the 
department  does.  Arrange  each  of  these  departments 
in  the  sequence  of  the  work  as  it  is  done,  or  as  the  product 
comes  through. 

S9 


COST    KEEPING    SHORT    CUTS 

Putting        Arrange  your  system  so  the  records  will  follow  the 

(-.Qg^.  sequence  of  operations. 
System  ,  ^j^y  factory  or  store  not  properly  departmentized  may 
have  a  working  chart  arranged  without  in  any  way 
interfering  with  the  actual  conduct  of  the  work  until  the 
system  has  been  fixed.  The  simple  principle  of  depart- 
mentizing  is,  a  department  should  handle  the  same  class 
of  operations  in  a  factory,  or  the  same  general  lines  of 
goods  in  a  store.  Machine  work  should  not  be  mixed  up 
with  wood  work  in  a  factory,  nor  shoes  with  white  goods 
in  a  store.  In  the  administration  department  the  sales 
making  and  the  accounting  branches  should  be  divided, 
the  general  executive  departments  should  be  individual- 
ized. 

For  instance,  take  a  machine  shop : 

This  is  divided  into  foundry,  tool,  paint,  lathe,  pattern, 
polishing,    planer    work    and    assembling    departments. 
Each  of  these  departments  has  its  own  expense  covering 
direct  labor,   direct   material,   general  indirect  expense. 
The  last  is  divided  into  departmental  general  indirect 
expense  and  then  into  an  account  which  carries  a  per- 
centage of  the  entire  indirect  expense. 
What  a        Any  factory  cost  system  should  do   several   things; 
System  some  of  course,  under  certain  circumstances,  being  much 
should  niore    important    than    others.     Among    the    important 
°  things  it  should  do  are: 

First — Ascertain  the  cost  per  unit  on  each  line  of 
the  factory  product. 

Second — Record  the  amount  of  time  spent  on  each 
operation,  or  each  order. 

Third — Show  location  in  plant  and  the  condition  of 
work  on  each  unfinished  unit. 

Fourth — Show  the  amount  of  productive  and  non- 
productive labor,  and  for  what  the  non-productive  labor 
is  used. 


COST    KEEPING    SHORT    CUTS 

Fifth — Show    the    amount    of   productive    and    non-  Putting 
productive  labor  and  materials,  and  give  stage  of  develop-  q^^^ 
ment  by  departments.  System 

Sixth — Show  total  output,  average  monthly  output, 
busy  time  and  idle  time  on  each  unit  of  output,  for  day, 
week  or  month. 

Seventh — Show  cost  per  hour  of  operating  each  class 
of  machines  and  by  departments. 

Eighth — Show  relative  overhead  and  direct  labor  cost 
per  hour,  or  per  unit,  in  each  department. 

Ninth — Show  whether  each  operation  is  increasing  or 
decreasing  in  cost,  and,  in  its  final  analysis,  whether  you 
are  making  goods  at  a  profit  or  a  loss. 

Finally,  it  should  be  understood  from  the  start  that  Finally 
cost  keeping  is  not  a  fad.  Be  convinced  that  it  is  a  prime 
necessity  to  financial  success.  Business — almost  any  kind 
of  a  businesses  but  a  guess  without  it.  It  requires  study 
and  judgment  and  steady  application  of  correct  prin- 
ciples. From  the  time  material  is  bought  until  it  is 
fashioned  by  the  workingman  into  the  finished  product, 
the  manufacturer  is  at  an  expense  that  never  ceases.     To  .  , 

ascertain  accurately  the  proportion  of  cost  a  job  unit  of 
production  should  be  charged  with,  is  the  function  of 
cost  accounting.  The  actual  work  done — the  visible 
work — the  grinding,  cutting,  punching,  shaping,  heating, 
polishing,  etc.,  are  too  commonly  figured  as  the  only  cost 
chargeable  against  the  job.  In  fact,  these  items  com- 
prehend about  fifty  per  cent  only  of  the  true  cost.  Why 
this  is  so,  and  wherefrom  these  additional  costs  accumu- 
late against  each  particular  unit  of  the  production,  cost 
accounting  makes  plain. 


SI 


CHAPTER  III 

Some  Systems  of  Paying  Wages 

IABOR  is  time  and  time  is  money  in  factory  economy. 
J  Time  is  one  of  the  most  expensive  things  the 

average  manufacturer  pays  for,  because  it  involves 
a  cost  that,  in  most  cases,  is  about  equal  to  cost  of 
material  and  overhead  expenses  combined. 

The  proper  cost  system  gives  an  absolute  check  on  the 
time  reports  of  workman  and  foreman  and  shows  just 
how  each  man's  time  has  been  expended. 

To  know  where  and  how  we  may  most  efficiently  apply 
the  time  of  our  employes  for  getting  the  best  results  is 
the  great  question  of  the  day. 

No  adequate  answer  to  this  question  can  be  found 
elsewhere  than  in  a  complete  and  thorough  cost  system. 

A  man  is  paid  wages  in  order  to  produce  certain 
results.  These  results  are  more  or  less  well  defined  just 
in  proportion  as  each  man's  work  in  a  factory  is  defined. 
It  is  not  likely  that  any  wage  system,  or  any  factory  is 
so  well  organized  that  there  is  an  absolutely  fixed  arbi- 
trary standard  for  a  man's  activities,  either  in  the  quality 
of  his  work  or  the  quantity  he  produces,  yet  wages  are 
the  standard  by  which  men  are  judged  in  the  world  of 
labor,  so  that  where  high  wages  abound,  good  work  is 
expected,  and  where  low  wages  abound,  a  corresponding 
grade  of  work  may  be  looked  for. 

On  the  other  hand,  the  cost  record  of  a  factory  is  the 
standard  by  which  men  are  judged  of  their  importance, 
their  ability  and  their  productiveness  in  the  economy  of 
that  factory.  The  amount  of  their  wages  is  dependent 
upon  that  record. 

It  is  therefore  important  that  the  man  who  works  for 
wages  produce  all  that  the  manufacturer  can  reason- 
ably expect  of  him,  or  that  the  manufacturer  has  been 

32 


COST    KEEPING    SHORT    CUTS 

able  to  get  from  anybody  else  doing  that  same  class  of  Some 
work.     Hence  the  necessity  for  a  manufacturer  to  know  ^J^  ^^^ 
from  actual  records  the  worth  of  a  man,  not  only  for  his  Paying 
own  protection,  but  also  that  he  may  pay  the  man  all      ^^^^ 
that  the  work  is  worth. 

Abstractly  speaking,  every  conscientious  man  who 
thinks,  should  endeavor  to  produce  the  utmost  for  the 
money  he  receives,  on  the  general  principle  that  "He 
profits  most  who  serves  best,"  but  unfortunately  too  few 
people  regard  the  matter  in  this  light.  Therefore,  we  must 
take  men  as  we  find  them,  and  in  order  to  get  the  greatest 
efficiency,  we  have  adopted  various  systems  that  place  a 
premium  on  a  man  doing  what  he  should  do,  and  when 
we  devise  a  wage  system  that  will  make  a  man  want  to 
produce  the  utmost  for  his  paj^  we  will  have  the  wage 
system  that  will  immediately  supplant  all  others. 

There  are  numerous  plans  by  which  the  wages  paid  to 
a  workman  can  be  determined.     They  are: 

1 — Day  Rate  Plan.  5 — Bonus  Plan. 

2— Piece  Work  Plan.  6— Profit  Sharing  Plan. 

3 — Differential  Plan.  7 — Stock  Distribution  Plan. 

4 — Premium  Plan. 

The  value  of  any  wage  system  over  another  necessarily 
depends  upon  the  conditions  of  the  plant  in  question,  and 
the  plan  must  be  adopted  after  a  careful  study  of  these 
conditions  and  the  nature  of  the  product. 

The  different  systems  will  be  briefly  explained  in  the 
following  chapters. 


33 


CHAPTER  IV 

Day  Rate  Wage  Plan 

THE  "day  rate"  or  the  "day's  work"  plan  is  one  of 
the  most  generally  used — first,  because  it  is  the 
simplest,  and  second,  because  it  makes  a  less  com- 
plicated payroll. 

It  applies  both  to  high  class  labor  and  to  men  engaged 
in  more  or  less  routine  work  and  those  employed  in  non- 
productive labor. 

It  consists  in  paying  a  workman  a  certain  rate  per  day 
or  per  hour;  the  amount  of  pay  being  determined  by  the 
market  rate  for  the  class  of  work  and  afterwards  by  the 
special  skill  of  the  workman. 

There  are  objections  to  this  plan,  especially  where  no 
adequate  cost  system  is  used,  because  there  is  no  incentive 
to  make  a  workman  do  his  best  or  to  produce  to  his  full 
capacity.  He  gets  so  much  a  day  whether  he  makes  100 
parts  or  whether  he  makes  75.  If  he  happens  to  be  faster 
than  his  fellow  workmen  and  discovers  that  he  is  doing 
more  work  than  they  he  asks  for  a  raise,  and  if  he  doesn't 
get  it,  slows  down  to  the  same  pace. 

In  other  words,  the  day  rate  gives  the  men  an  oppor- 
tunity to  take  it  easy,  their  only  incentive  being  a  prod 
from  the  foreman  when  he  sees  that  they  are  "soldiering." 
It  is  all  in  favor  of  the  workman. 

The  only  way  in  which  a  day  rate  plan  can  be  equalized 
between  employer  and  employe  is  by  a  cost  system.  Of 
course  the  total  labor  cost  can  be  predetermined  on 
account  of  the  fixed  rate  paid  to  the  men,  but  the  relation 
between  the  rate  and  the  amount  of  work  each  man  is 
turning  out  cannot  be  exactly  known  unless  some  kind 
of  record  is  kept. 

There  are  some  classes  of  labor  where  the  amount  of 
work  is  not  measurable  by  quantities,  such  as  engineers, 

$i 


COST    KEEPING    SHORT    CUTS 

firemen,   inspectors,   truckmen,   watchmen,    clerks,    etc.  Day 
These  necessarily  must  be  paid  so  much  per  day,  but  the  pj^^j 
men  who  turn  out  the  goods  can  be  measured  by  the 
amount  of  work  they  do. 

Suppose  that  each  man  turns  in  a  labor  distribution 
ticket  every  night,  showing  how  much  work  he  has  done 
during  the  day,  or  turns  in  a  separate  ticket  when  he  has 
finished  a  job.  .  The  information  thus  gathered,  if  properly 
used,  will  show  the  relative  value  of  workmen. 

This  is  especially  true  where  a  certain  rate  per  hour  is 
paid  and  there  is  prospect  for  an  increase  of  pay  with  an 
increased  amount  of  work.  Under  these  conditions  the 
labor  distribution  tickets  which  are  turned  into  the  cost 
department,  and  which  show  the  time  consumed  on  cer- 
tain jobs  by  different  workmen,  contain  data  that  indi- 
cates those  who  deserve  a  "raise."  Without  an  increase 
of  pay  in  view,  the  tickets  would,  in  all  probability,  show 
a  dead  level  of  production  on  the  part  of  all  the  workmen 
and  be  of  no  utility  except  to  indicate  that  some  man  is 
wasting  an  unusual  amount  of  time. 

The  necessity  for  a  well-ordered  system  whereby  a 
factory  management  can  know  the  relative  value  of  work- 
men arises  from  the  fact  that  factory  employes,  as  a 
general  rule,  are  given  to  frittering  away  as  much  time  as 
possible. 

Time  is  money  to  the  manufacturer  always;  to  the  Time  is 
employe  only  when  it  is  made  to  appear  so. 

The  men  are  paid,  say,  for  ten  hours  a  day.  If  they 
waste  half  an  hour  or  an  hour  of  it  the  employer  pays 
just  the  same  amount  as  if  the  full  ten  hours  had  been 
productive.     This  increases  the  cost  of  his  goods. 

The  table  on  the  following  page  shows  how  much 
money  a  daily  waste  of  five  minutes  amounts  to  in  a  year 
and  should  be  studied  carefully  by  every  employer  who  is 
anxious  to  cut  down  the  cost  of  production. 

S5 


COS 

T 

KEEP 

I    N 

G         S    H    0 

R    T 

C     U 

T    S 

Rate 

Loss 

Day 

per 

by  1        By  10 

Man         Men 

By  20 

By  25         By  .'J5 

By  40 

By  50 

By  100 

Men 

Rate 

Day 

Men 

Men           Men 

Men 

.     Men 

Plan  $1.00  $2.90  $29.00  $  58.00 

$  72.50  $101.50  $116.00  $145.00  $290.00 

1.25 

3:62     36.20 

72.40 

90.50     126.70 

144.80 

181.00 

362.00 

1.50 

4.35     43.50 

87.00 

108.75     152.25 

174.00 

217.50 

435.00 

2.00 

5.80     58.00 

116.00 

145.00     203.00 

232.00 

290.00 

580.00 

2.50 

,7.25     72.50  ■ 

145.00 

181.25     253.75 

290.00 

362.50 

725.00 

3.00 

8.69     86.90 

173.80 

217.25     304.15 

347.60 

434.50 

869.00 

Labor  distribution  tickets  are  made  out  by  the  fore- 
man or  his  clerk,  and  on  them  are  recorded  the  time  of 
beginning  and  finishing  a  job. 

They  provide  a  means  of  keeping  "tab"  on  the  men 
and  finding  the  exact  labor  cost. 

This  is  especially  true  of  a  factory  that  is  turning  out  a 
uniform  commodity. 

The  very  fact  that  each  workman  has  a  ticket  and 
knows  that  the  work  he  is  doing  will  be  timed  by  it  in  the 
cost  department,  makes  him  put  forth  more  effort. 

If  he  wastes  time  and  escapes  the  surveillance  of  his 
foreman  to-day,  his  ticket  will  indicate  the  extra  time  to 
complete  a  job  and  show  the  discrepancy  between  to-day's 
work  and  the  work  on  the  same  job  to-morrow  or  next 
day.  Besides,  there  are  other  workmen  engaged  in  the 
same  work  with  whose  expertness  he  can  be  compared. 
The  The  adding  machine  plays  a  most  important  part  in 
,^^^i^g  the  addition  of  time  and  amounts  on  the  labor  distribu- 
tion  tickets,  not  only  for  getting  labor  cost  of  jobs  and 
checking  the  payroll,  which  will  vary  with  absentees, 
latesj^new  men,  etc.,  but  for  compiling  data  from  which 
information  can  be  obtained  regarding  any  man's  record. 

A  daily  or  weekly  charge  to  accounts  or  to  depart- 
ments, and  the  earnings  of  workmen,  cost  of  jobs,  etc.,  can 
be  quickly  determined  with  an  adding  machine. 

In  fact  the  machine  makes  possible  the  compilation  of 
valuable  statistics,  within  a  reasonable  length  of  time, 
such  as  would  be  practically  impossible  without  it. 

And  a  still  greater  advantage  of  exact  statistical  infor- 
mation is  that  it  makes  the  day  rate  wage  plan  more 
equitable  to  the  employer.  It  shows  him  whether  or  not 
his  men  are  doing  their  work  faithfully. 

36 


CHAPTER  V 

Piece  Work  Wage  Plan 


"b' 


THE  piece  work  wage  plan  is  based  on  the  principle  of 
paying  the  employe  for  the  exact  amount  of  work 
he  is  capable  of  doing.  He  gets  so  much  per  piece 
or  so  much  per  hundred  pieces,  and  therefore  has  a 
chance  theoretically,  and  to  a  considerable  extent  in 
practice,  to  earn  according  to  his  efforts  and  abilities. 

The  tendency  of  workmen  to  lag  when  paid  by  the  day 
or  hour  is  so  universally  manifest  in  all  kinds  of  business 
that  the  manufacturer  must  realize  that  he  is  paying  too 
much  for  his  labor  when  he  uses  this  plan. 

In  order  to  remedy  this  defect  in  the  day  rate  plan, 
the  piece  rate  was  instituted.  No  sooner  did  it  go  into 
effect,  however,  than  the  rate  of  production  in  some  fac- 
tories jumped  by  leaps  and  bounds  and  men  who  were 
formerly  employed  at  $2.50  and  $3.00  per  day  began  to 
earn  wages  of  $4.00  and  $5.00. 

This  fact  immediately  showed  the  manufacturer  that 
he  had  been  imposed  upon  by  his  workmen  while  oper- 
ating under  the  day  rate  plan.  In  order  to  adjust  prop- 
erly the  wages  to  the  class  of  work  being  done  he  made  a 
cut  in  the  rate  per  piece. 

The  inevitable  cut  shows  the  workmen  that  if  they 
produce  too  much  they  will  only  set  for  themselves  a  high 
speed  standard  and  still  be  unable  to  earn  more  than  a 
certain  maximum  amount.  So  human  nature  again 
creeps  in  and  the  men  begin  to  work  just  fast  enough  to 
get  the  highest  wage  without  going  beyond  the  limit  that 
will  mean  a  cut. 

In  this  way  the  full  advantage  of  a  piece  work  rate  is 
considerably  modified. 

This  system  also  makes  it  necessary  to  inspect  care- 
fully all  parts  because  of  the  increased  rapidity  with  which 


COST        KEEPING        SHORT        C    UTS 

Piece  they  are  made  and  the  corresponding  liabihty  to  faulty 
Plan  workmanship.  Each  workman  is  held  responsible  for 
the  parts  rejected  and  in  this  way  compelled  to  exercise 
care  in  their  manufacture. 

It  requires  tact  and  expert  judgment  to  change  from  a 
day  rate  to  a  piece  rate  plan,  and  care  must  be  taken  that 
no  intimation  of  the  new  plan  gets  abroad.  For  days, 
the  rate  of  production  of  the  men  engaged  in  the  different 
classes  of  work  must  be  quietly  observed  in  order  to 
arrive  at  a  fair  price  per  piece. 

It  has  been  the  experience  of  many  manufacturers 
that  when  a  price  was  thus  arrived  at,  it  was  found  to  be 
far  too  high,  as  proven  by  the  enormous  increase  of  pro- 
duction following  immediately  after  the  piece  rate  went 
into  effect.  Because  of  this,  considerable  friction  arises 
between  the  men  and  the  manager  before  the  piece  rate  is 
finally  adjusted  to  the  point  where  equity  is  guaranteed 
to  both. 

Another  failing  of  the  piece  rate  plan  is  this :  If  each 
man  is  allowed  to  earn  according  to  his  utmost  power  of 
production,  there  will  always  be  found  some,  who  by  vir- 
tue of  unusual  skill,  will  earn  a  very  large  amount.  This 
makes  the  manufacturer  feel  that  he  is  paying  too  much 
for  his  labor  and  at  the  same  time  arouses  the  antagonism 
of  other  workmen  who  can't  earn  an  equally  large  amount. 
System  An  adequate  cost  system  is  necessary  to  the  most 
ecessary  g£pg(.|-iyg  handling  of  piece  rate  workers'  time  and  earn- 
ings. Labor  distribution  tickets  are  used  the  same  as 
with  the  day  rate  plan,  the  time  required  for  making  a 
certain  number  of  parts  being  recorded.  This  informa- 
tion gives  the  cost  keeper  an  opportunity  to  find  out 
whether  every  workman  is  doing  his  best.  Some  men, 
who  could  earn  $3.00  per  day  by  applying  themselves,  are 
content  to  earn  $1.75  or  $2.00  and  ease  down  on  their 
work  accordingly.  This  is  a  detriment  to  the  general 
efficiency  of  the  factory  and  must  be  discouraged. 


C    OST        KEEPING        SHORT        CUTS 

The  cost  keeper  finds  that  the  adding  machine  is  Piece 
indispensable  for  getting  the  total  time  and  earnings  of  pi^n 
piece  workers  on  different  jobs  without  an  undue  expen- 
diture of  clerical  time  and  labor. 

After  getting  the  total  labor  cost  of  a  job  or  operation, 
the  machine  is  used  for  making  extensions  to  determine 
the  burden  or  indirect  expense  on  that  job  or  operation 
and  in  this  respect  saves  time  and  money.  In  addition 
to  the  time  saved  there  is  an  assurance  of  accuracy  in  the  , 
listed  proof  of  the  work. 

Many  other  additions  and  multiplications  are  neces- 
sary to  get  the  total  department  cost,  the  total  cost  by 
accounts  and  to  extend  the  price  of  certain  parts  requi- 
sitioned from  the  finished  stock  room. 

And  the  Burroughs  has  the  capacity  both  to  add  and 
list  and  to  multiply,  printing  every  item  so  that  proof  can 
be  easily  obtained.  Then  the  totals  can  be  recapitulated 
by  accounts  and  the  bookkeeper  furnished  with  neatly 
and  accurately  tabulated  sheets  from  which  to  make  his 
postings  to  the  Cost  Ledgers. 


CHAPTER  VI 

Differential  Rate  Wage  Plan 

THE  third  plan  is  known  as  the  differential  rate  plan 
and  has  met  with  the  approval  of  a  great  many 
manufacturers  because  of  the  equitable  adjustment 
of  wages  to  production. 

This  plan  consists  of  paying  the  workman  an  increased 
rate  per  piece  according  to  the  increased  number  of  pieces 
that  he  produces  above  a  certain  standard,  and  likewise 
of  decreasing  the  rate  per  piece  in  case  the  number  he 
produces  falls  below  the  standard,  which  has  previously 
been  fixed  by  ascertaining  the  average  earning  capacity 
of  all  the  workmen. 

The  easiest  way  to  explain  this  plan  is  by  an  illustra- 
tion. 

Suppose  the  manufacturer  has  found  out  by  experi- 
ence that  eight  of  a  certain  kind  of  parts  can  be  made  by 
the  average  workman  in  a  day  of  ten  hours  and  that  for 
each  part  27  cents  can  be  paid. 

The  manufacturer  tells  the  workmen  who  are  engaged 
on  this  class  of  work  that  if  they  will  make  ten  parts  a 
day  and  do  the  work  perfectly,  they  will  receive  29  cents 
a  piece  for  them,  and  if,  by  their  industry  and  ability  they 
can  make  eleven  parts  a  day,  they  will  receive  30  cents 
a  piece  for  the  work.  Likewise  he  tells  them  that  in  case 
they  fail  to  make  as  many  as  eight  parts,  the  price  per 
part  will  be  lowered  so  that  if  only  seven  parts  are  turned 
out,  they  will  get  25  cents  a  piece  for  them.  It  will  be 
seen  from  this  that  each  workman  is  given  an  opportunity 
to  earn  extra  money. 

Looking  at  it  from  the  manufacturer's  standpoint  the 
man  who  can  turn  out  the  most  work  even  at  the  increased 
rate  per  part  is  more  economical  to  him  and  reduces  the 
final  cost  of  each  part  more  than  the  man  who  turns  out 


COST    KEEPING    SHORT    CUTS 


only  a  few  pieces  and  gets  the  smaller  rate  per  part.  Differen- 
This  is  true  because  the  burden  or  overhead  cost  for  p^^^ 
manufacturing  a  few  more  parts  a  day  is  not  as  great  in 
proportion  to  the  number  of  parts  manufactured  as  when 
fewer  parts  are  made  each  day  and  the  work  is  spread  out 
over  several  days.  Thus  the  amount  of  burden  to  be 
added  to  the  eleven  parts  that  a  skilled  workman  turns 
out  in  one  day  is  not  as  great  as  the  amount  to  be 
added  to  the  same  number  of  parts  when  made  by  a  less 
rapid  workman  who  turns  out  only  seven  parts  in  one 
day  and  leaves  four  parts  to  be  manufactured  the  second 
day.  This  reduction  of  burden  per  piece  very  materially 
reduces  the  final  cost. 

The  following  table  shows  how^  the  man  who  makes 
the  fewest  parts  per  day  actually  costs  the  company  more 
money  than  does  the  man  who  make  more  parts  and  gets 
more  for  each  part: 

No.  of         Price  per  Labor  Cost  of  Overhead  Total  Cost  per 

Articles  Article  •    Cost  Material  Cost  Cost  Article 

7  $0.25     $1.75     $0.70     $1.50     $3.95      56^ 

8  .27     2.16      .80      1.50     4.46      55f 

10  .29     2.90     1.00      1.60     5.50      55 

11  .30     3.30     1.10      1.64     6.04      54ff 

One  of  the  best  features  of  this  plan  is  that  the  poor  Poor  Pay 
workman  gets  poor  pay  and  the  good  workman  gets  good  ^^^  °°^ 
pay,  thus  differentiating  the  grades  of  employes  much 
more  effectively  than  when  the  straight  piece  work  plan 
is  used.  The  poor  workman  cannot  reasonably  * 'kick*' 
on  his  lower  pay  when  he  is  shown  that  his  inefficiency  is 
actually  making  the  manufactured  article  cost  more  per 
piece  than  in  the  case  of  the  man  who  is  getting  higher 
pay  and  doing  more  work. 

It  is  the  opinion  of  cost  experts  that  for  a  factory  or 
plant  where  indirect  expenses  are  very  large  in  compari- 
son to  the  cost  of  labor,  the  differential  rate  plan  is  almost 
sure  to  pay,  but  where  this  indirect  cost  is  comparatively 
small,  the  advantage  is  more  doubtful. 

41 


COST    KEEPING    SHORT    CUTS 

Differen-        When  the  differential  rate  plan  is  in  operation  it  is 
pj^jj  necessary  to  maintain  a  very  rigid  inspection  department 
so  that  faulty  workmanship  due  to  the  increased  speed  on 
the  part  of  some  workmen  may  not  slip  through. 

A  few  advantages  of  the  differential  plan  may  be 
summed  up  as  follows: 

First — The  wages  are  raised  and  the  cost  is  lowered, 
thus  bringing  about  a  better  feeling  between  employer 
and  employe. 

Second — The  work  is  of  a  uniform  quality,  owing  to 
the  system  of  inspection. 

Third — It  obtains  a  maximum  production  per  unit  of 
time  because  of  the  fact  that  the  workman  is  laboring  for 
higher  wages  and  at  the  same  time  is  prevented  from  turn- 
ing out  inferior  work  by  the  inspection  of  the  parts  that 
he  makes. 

Fourth — It  discourages  and  automatically  relieves  the 
factory  of  incompetent  workmen  since  they  can't  blame 
anyone  but  themselves  for  their  small  wages. 

Labor  distribution  tickets  again  enter  into  the  proper 
recording  of  work  done  by  this  system.  In  order  to  have 
the  required  data  at  hand  for  figuring  earnings,  it  is 
absolutely  necessary  to  use  tickets  on  which  are  given 
the  time  put  on  a  job,  the  number  of  pieces  made,  etc. 
The  strong  point  in  favor  of  an  adding  machine  to  handle 
work  of  this  kind  is  that  it  can  be  used  for  making  the 
numerous  extensions  of  rates  per  piece  and  the  number  of 
pieces  turned  out  by  each  workman. 
Multipli-  Thus,  in  the  example  in  Figure  1,  there  are  three 
l^achine  different  extensions  to  make  in  order  to  arrive  at  the 
earnings  of  the  men  who  turn  out  132,  144  and  165  pieces 
respectively. 

While  these  problems  are  simple,  there  are  many 
where  the  number  of  pieces  run  into  the  thousands  at  a 
rate  of  so  many  cents  or  a  rate  of  so  many  cents  and  mills 
per  hundred. 

42 


COST 


KEEPING 


SHORT 


CUTS 


This  complicates  the  extensions  and  makes  the  adding  Differen- 


machine  especially  useful. 

To  those  who  are  unfamiliar  with  the  Adding  Machine 
it  might  seem  like  a  contradiction  to  cite  instances  where 
it  is  used  for  multiplying,  but  as  a  matter  of  experience,  it 
is  capable  of  performing  multiplication  about  three  times 
as  fast  as  it  can  be  done  mentally.  It  can  be  used  with 
equal  facility  in  handling  either  whole  numbers  or  whole 
numbers  combined  with  fractions. 

I  The  value  of  a  listing  machine  in  this  case  is  obvious, 
since  it  records  the  operation  and  thus  gives  proof  of  the 
work. 


tial  Rate 
Plan 


.Zls    — 

er/cs  — 

.r/cs  — 

1  3  2  ^.2  4 

1  4  4  ^.2  6 

1  6  5  ■^S  5 

■5J- 

1.3  2 

1.4  4 

•i'C- 

1.6  5 

1.3  2 

1.4  4 

1.6  5 

1.3  2 

1.4  4 

1.6  5 

1.3  2 

1.4  4 

1.6  5 

13.2  0 

1.4  4 

1.6  5 

13.2  0 

1.4  4 

16.5  0 

#3  1.6  8-;:- 

14.4  0 

16.5  0 

14.4  0 

16.5  0 

/  3  7.4  4^'^- 

^5  7.7  5«- 

Pig.  1 

Facsimile  reproduction  of  three  multiplications  made  with  a  Burroughs 
Adding  Machine. 


48 


CHAPTER  VII 

Premium  Wage  Plan 


"&' 


THE  next  wage  plan,  which  is  conceded  to  be  one  of 
the  most  successful  in  actual  operation,  is  known 
as  the  Premium  Plan. 

This  is  somewhat  similar  to  the  differential  plan,  the 
difference  being  that  instead  of  increasing  the  rate  per 
piece,  the  increment  of  earning  is  based  upon  time  saved. 
That  is,  a  certain  premium  is  given  for  the  time  saved  in 
completing  a  job  for  \yhich  an  average  time  has  been  pre- 
determined. 

In  addition,  a  minimum  wage  is  incorporated  in  this 
plan,  which  assures  the  workman  of  a  certain  amount  of 
pay  in  case  he  fails  to  s,ave  time  on  account  of  accidents, 
etc.  This  has  placed  the  whole  system  in  a  more  favorable 
light  with  the  employes,  thus  reducing  the  general 
opposition  to  its  installation. 

It  can  best  be  illustrated  by  example :  Suppose  a  man 
is  working  ten  hours  a  day  at  the  rate  of  26  cents  an  hour. 
At  this  rate,  he  will  earn  $2.60  a  day. 

The  manufacturer  tells  him  that  if  he  will  cut  down 
the  time  on  a  job  from  ten  hours  to  nine  hours  he  will  pay 
him  26  cents  an  hour  for  those  nine  hours,  which  is  $2.34, 
and  will  divide  with  him  the  wage  that  he  would  have  been 
paid  for  work  done  in  the  remaining  hour.  If  this  division 
is  on  a  half-and-half  basis,  the  workman  will  get  $2.34, 
plus  13  cents,  or  $2.47.  Then  he  has  another  hour  to 
work  during  which  time  he  can  earn  more.  If  he  saves 
two  hours,  he  will  receive  26  cents  an  hour  for  the  eight 
hours,  which  will  amount  to  $2.08,  and  get  one-half  of  the 
two  remaining  hours'  wages,  which,  on  the  half-and-half 
basis,  amounts  to  26  cents.  In  this  case  he  has  two  hours 
more  during  that  day  in  which  to  earn  an  additional  wage; 


COS    T 


KEEPING 


S    H    O    R    T 


CUTS 


and  even  if  he  earns  no  additional  premium  during  these  Premium 
two  hours,  he  will  at  least  get  the  regular  rate  of  26  cents  pj^^^ 
per  hour,  or  52  cents  in  all. 

So  for  the  day  of  10  hours  work  under  these  conditions, 
he  will  earn  $2.08  pay  for  eight  hours,  plus  26  cents  bonus 
for  saving  two  hours,  plus  52  cents  additional  wage  earned 
in  the  two  hours,  or  $2.86  in  all. 

Thus  the  workman's  superior  skill  and  speed  have 
-earned  him  more  money  while  the  employer  has  obtained 
a  greater  number  of  parts  at  a  lower  final  cost  per  part. 

This  plan  has  also  the  advantage  of  inspiring  the  men 
with  an  ambition  to  exert  themselves  to  their  full  capacity 
and  at  the  same  time  it  automatically  remunerates  them 
according  to  their  ability. 

In  the  piece  work  plan  the  employe  gets  the  benefit, 
the  employer  saving  only  in  the  burden  or  indirect  expense. 
Under  the  Premium  Plan,  the  profit  is  divided  more  evenly 
and  both  the  employer  and  employe  enjoy  its  benefits. 
The  table,  *Figure  2,  gives  an  idea  of  the  relative  efficiency 
as  to  saving  in  labor  cost  between  the  different  systems  in 
vogue  at  the  present  day. 


Systems 

11 

Rate  of  Pay 

is 

h 

3« 

]a 

Overhead 
Cost 

Total 
Cost 

Cost  per 
Article 

TeductioT 
in  Cost  per 
100  Articles 

Day  Rate 

Piecework... 

Differential... 

Premium 

Bonus 

.8 
8 

10 
8 

10 
8 

10 

8 
10 

.30  per  hour  .'.  .  . 
.32  per  piece.  .  .  . 
.32  per  piece .... 
.32  per  piece .... 
.34  per  piece .... 
.28  per  hour  .... 
.14  additional  for 

each  hour 

saved. 
.28  per  hour  .... 
.32  per  hour  .... 

$3.00 
2.56 
3.20 
2.56 
3.40 
2.80 
3.15 

2.80 
3.20 

.'eV 

'  .84 

.35" 
.40' 

$1.00 
1.00 
1.25 
1.00 
1.25 
1.00 
1.25 

1.00 
1.25 

$1.50 
1.50 
1.60 
1.50 
1.60 
1.50 
1.60 

1.50 
1.60 

$5.50 
5.06 
6.05 
5.06 
6.25 
5.30 
6.00 

5.30 
6.05 

.6875 
.6325 
.6050 
.6325 
.6250 
.6625 
.6000 

.6625 
.6050 

$2;75" 
".75 
6;25 

'5.75 

Fig.  2 

Comparative  Costs  of  Similar  Articles  as  resulting  from  the  different 

Wage  Plans,  showing  effect  upon  Labor  Cost,  Material 

Cost,  Overhead  Cost  and  Total  Cost. 

♦"Nicholson  on  Factory  Organization  and  Costs," 

45 


COST    KEEPING    SHORT    CUTS 

Premium  It  will  be  seen  that  the  premium  plan  has  a  great  deal 
pff^  in  its  favor  as  regards  the  reduction  in  the  cost  price  per 
article.  This  system  also  necessitates  an  exact  set  of 
records  in  order  that  no  workman  will  be  deprived  of  his 
just  earnings  and  also  that  no  "soldier"  will  share  in  the 
premiums  which  he  has  not  earned. 

The  labor  distribution  tickets  necessary  for  this 
information  can  be  handled  with  the  greatest  possible 
accuracy  and  speed  on  an  adding  machine.  Likewise  the 
many  extensions  that  must  be  made  where  workmen  are 
reducing  the  amount  of  time  on  a  job  and  thereby  earning 
wages  based  on  this  reduction,  can  be  figured  more  quickly 
and  accurately  with  an  adding  machine  than  by  hand  and 
mind. 


CHAPTER  VIII 

Bonus  Wage  Plan 

THE  bonus  plan  is  based  on  the  principle  of  increasing 
the  pay  in  a  certain  ratio  as  the  time  for  completing 
a  job  is  decreased,  the  rate  depending  on  the  per 
cent  of  time  saved. 

By  referring  to  the  table  on  page  45,  it  will  be  seen 
that  where  eight  articles  are  made  in  ten  hours,  on  the 
Bonus  Plan,  the  rate  per  hour  is  28  cents,  and  where  ten 
articles  are  made  the  rate  per  hour  is  32  cents. 

This  plan  is  practically  the  same  as  the  Premium  Plan 
and  in  fact  some  cost  accountants  make  no  distinction 
between  them. 

The  same  circumspection  must  be  used  in  introducing 
this  plan  to  the  factory  as  with  the  Premium  or  Piece 
Work  Plans,  care  being  taken  to  fix  as  accurately  as  pos- 
sible the  rate  of  increase  in  wages  resulting  from  time 
saved  on  a  job. 

One  fact  in  connection  with  the  installation  of  the 
Premium  or  Bonus  Systems  should  be  borne  in  mind. 
Where  there  is  only  a  little  machine  work,  the  rate  should 
be  made  fairly  low,  since  the  rate  per  cent  of  increase  will 
be  large.  But  if  the  work  involves  machine  work  it  will 
require  a  greater  application  of  skill  and  effort  to  effect 
a  large  increase,  and  therefore  a  Premium  rate  with  a 
fairly  high  premium  can  be  used. 

In  other  words  the  increase  where  machine  work  is 
prevalent  has  been  found  to  be  comparatively  small  in 
contrast  to  manual  work. 

Other  points  of  excellence  in  the  Premium  and  Bonus 
Plans  may  be  summed  up  thus:  In  using  these  plans 
the  employe's  reward  is  immediate  as  compared  with  the 
results  of  other  plans,  such  as  profit  sharing.     The  fact 

47 


COST    KEEPING    SHORT    CUTS 

Bonus  that  quick  rewards  are  obtained  appeals  to  the  average 
workman. 

The  workman  does  not  have  to  pay  a  penalty  for  not 
"speeding  up,"  except  the  loss  of  his  "bonus"  or  being 
discharged  when  he  has  proven  unfit  for  the  work.  The 
minimum  wage  makes  it  easier  to  install  the  Premium  and 
Bonus  Systems  because  it  does  away  with  the  intense 
antagonism  that  is  generally  shown  when  a  new  plan  is 
proposed. 

It  is  an  excellent  incentive  for  the  men  to  exert  them- 
selves to  their  full  capacity  when  they  realize  that  they 
will  be  rewarded  according  to  the  amount  of  work  they 
turn  out. 

The  management  does  not  suffer  as  much  loss  in  case 
of  an  over-estimation  in  the  rate  of  Premium  or  Bonus, 
and  it  provides  a  more  equitable  division  of  profits 
between  employer  and  employe. 


48 


CHAPTER  IX 
Profit  Sharing  and  Stock  Distribution  Plans 

THERE  are  two  other  plans  that  are  calculated  to 
bring  increased  production  and  better  relations 
between  employer  and  employe.  These  are  the 
profit  sharing  and  stock  distribution  plans.  There  is  not 
as  much  definite  information  about  them  as  in  the  case 
of  other  plans  because  they  have  only  been  tested  out  in 
comparatively  few  cases.  However,  it  will  be  well  to 
understand  the  principles  upon  which  they  are  based. 

The  Profit  Sharing  Plan  embodies  the  feature  of  the 
workmen  sharing  in  the  profits  of  the  factory  but  it  has 
the  defect  of  not  discriminating  between  the  good  and 
poor  workmen,  both  sharing  the  profits  alike. 

Then  again,  the  increased  profits  of  a  plant  may  result 
from  the  selling  force  or  from  some  source  entirely  outside 
the  activities  of  the  workmen,  in  which  case  they  have  no 
just  claim  to  a  share  in  the  profits.  And,  if  through  some 
mismanagement,  there  are  losses  instead  of  profits,  they 
object  to  standing  their  share  of  the  losses. 

Another  disadvantage  of  the  plan  is  that  the  rewards 
are  too  far  in  the  future  to  be  much  of  an  incentive  to  the 
average  man  to  put  forth  his  best  efforts.  Ordinarily, 
the  profits  are  figured  but  once  a  year  and  this  means 
that  each  workman  must  wait  a  year  before  he  can  know 
how  much  his  share  amounts  to. 

A  number  of  authorities  hold  that  there  is  only  one 
practical  method  of  handling  the  profit  sharing  plan  and 
that  is  to  set  a  price  on  every  article  manufactured.  The 
factory  is  charged  only  with  such  expenditures  as  relate 
to  its  production  and  a  predetermined  burden  for  super- 
vision. The  factory  is  then  credited  for  all  articles  at  this 
scheduled  price  whether  they  are  sold  or  not. 

49 


COST    KEEPING    SHORT    CUTS 

Profit  When  the  inventory  is  taken,  the  factory  account  in 

^^"^^  the  ledger  will  show  the  factory  profit  and  the  difference 
between  the  actual  cost  and  schedule  price.  Whatever 
saving  there  may  be  is  distributed  among  the  foremen  of 
the  different  departments  and  in  some  instances  among  the 
employes,  according  to  the  rate  of  pay  for  each  man. 

Penalties  are  enforced  for  faulty  workmanship,  poor 
attendance,  and  so  forth,  according  to  existing  conditions. 
The  stock  distribution  plan  will  probably  be  more 
successful  in  small  shops  where  the  proprietor  and  work- 
men are  brought  into  closer  touch  with  one  another. 
The  same  defects  exist  in  this  plan  when  applied  to  the 
larger  shops,  as  in  the  case  of  the  profit  sharing  plan. 

In  reviewing  the  different  wage  systems,  it  must  be 
borne  in  mind  that  the  success  of  any  one  of  them  depends 
as  much  upon  the  manager's  tact  and  sympathy  and 
understanding  of  the  workmen's  attitude  as  upon  the  plan. 
The  Any  plan  in  itself  is  a  cold-blooded  proposition,  and  in 

fs^CoW  order  to  warm  it  up,  it  must  be  imbued  with  a  good  deal 
of  human  interest.  In  going  about  the  installation  of  any 
wage  system,  the  manager  must  study  carefully  the  class 
of  men  whom  he  has  employed  and  look  at  the  whole 
situation  as  much  as  possible  from  their  standpoint.  By 
doing  so  he  will  provide  himself  with  a  guide  that  will 
lead  to  the  plan  best  suited  to  his  particular  case  and  the 
one  calculated  to  produce  harmonious  relations  between 
himself  and  his  employes. 

The  systems  we  have  just  outlined  have  been  in  actual 
operation.  Some  of  them  have  proven  more  efficient  than 
others  but  the  object  of  all  of  them  is  to  increase  produc- 
tion and  bring  about  an  equitable  adjustment  between 
the  amount  of  pay  given  out  and  the  amount  of  labor 
received. 


CHAPTER  X 

Judging   the   Costkeeping   Requirements   of   a 
Factory 

GREAT  care  should  be  taken  in  the  introduction  of  a 
Cost  System  in  a  factory.  In  one  case  a  firm 
manufacturing  a  specialty,  and  employing  about 
1200  men  in  the  factory,  introduced  a  system  that 
ultimately  required  nearly  250  printed  forms.  When 
these  were  rearranged  and  a  proper  system  was  installed, 
all  but  23  of  the  forms  were  discarded.  The  saving,  of 
course,  was  tremendous. 

This  condition  of  over  systematizing  generally  comes 
as  a  result  of  '^letting  the  system  work  out  itself,"  instead 
of  having  some  specialist  come  in  and  work  out  a  complete 
plan  of  costkeeping,  coherent,  logical,  thorough,  with 
definite  objects  in  view. 

Where  a  form  is  introduced  to  get  a  certain  set  of  facts 
or  figures — then  another  form  to  get  something  else — then 
another  and  so  on,  as  is  done  in  so  many  places,  the  cost 
system  is  a  menace,  breeding  confusion  and  loss  of  time 
when  it  should  nourish  order  and  efficiency. 

Remember,  however,  that  mere  forms  do  not  make  a 
system;  nor  do  an  adding  machine,  a  typewriter,  or  a  few 
clerks  make  a  system.  They  are  simply  the  physical 
expression  of  a  system. 

No  form  in  this  book  should  be  put  in  operation  by  a 
manufacturer  or  business  house,  until  it  has  been  care- 
fully considered,  both  in  its  relation  to  the  specific  thing 
that  the  form  is  to  record,  and  in  its  relation  to  every 
other  form  in  the  system.  It  is  well  to  keep  in  view 
one  thing.  Put  on  the  form  just  as  much  data  as  you 
can.  Don't,  however,  use  any  one  ,form  for  entirely 
different  classes  of  data. 


COST    KEEPING    SHORT    CUTS 

Judging         A  cost  system  to  be  complete  must  embrace  every  item 
^ments  ^^  expense  connected  with  a  commodity  from  the  time 
the  raw  material  is  received  in  the  factory,  until  the 
finished  product  is  sent  to  the  shipping  room. 

In  order  to  provide  a  set  of  records  that  will  give  this 
information,  cost  has  been  divided  into  three  parts: 

1.     Cost  of  Material. 

^.     Cost  of  Labor. 

3.     Indirect  Expense  or  Burden. 

Cost  of  material  and  cost  of  labor  are  very  closely 
related,  these  two  combined  giving  the  prime  cost  or  flat 
cost  of  any  article. 

The  indirect  expense,  while  a  most  vital  factor,  is  in  a 
way  separate  and  distinct.  However,  it  is  necessary  to 
know  this  indirect  expense  and  to  distribute  it  over  all 
the  manufactured  articles  in  order  that  a  selling  price  may 
be  fixed  that  will  insure  a  profit. 

It  is  a  well-known  fact  that  all    the   raw  material 

coming  into  the  factory  does  not  go  into  the  manufacture 

of  the  goods.     Some  of  it  is  used,  for  instance,  to  make 

tools  with  which  the  articles  are  made. 

Division        This  leads  up  to  the  division  of  material  cost  into  two 
of  Costs     1 

classes : 

First — Direct  material  cost. 

Second — Indirect  material  cost. 

The  direct  material  cost  is  the  cost  of  all  material  that 
goes  into  the  product. 

The  indirect  material  cost  is  that  which  embraces  the 
cost  of  factory  supplies,  tools  and  so  forth,  and  cannot 
be  charged  as  a  component  of  the  product.  It  is,  however, 
included  in  the  burden  or  an  indirect  expense. 

Labor  cost  is  also  divided  into  two  classes : 

First — Direct  Labor. 

Second — Indirect  labor. 

The  direct  labor  cost  is  that  which  constitutes  the 
pay  of  the  men  who  actually  work  on  the  product. 

5? 


COST 


KEEPING 


SHORT 


CUTS 


Indirect  labor  cost  embraces  all  labor  about  the  fac- 
tory that  does  not  actually  produce  goods.  All  foremen, 
repairmen,  handlers  of  material,  errand  boys  and  the  like, 
come  under  this  classification,  which  is  also  included  in 
burden. 

Factory  burden  is  composed  of  indirect  cost  of  labor, 
indirect  cost  of  material  and  indirect  expense.  Indirect 
expense  includes  such  items  as  light,  heat,  power, 
maintenance,  insurance,  taxes,  depreciation  and  similar 
expenses  which  are  necessary  to  the  manufacture  of  the 
goods. 

t,^  Burden  should  be  figured  with  the  greatest  possible 
accuracy  and  properly  distributed  over  each  of  the  articles 
manufactured,  according  to  the  amount  of  direct  labor  or 
of  time  and  material  expended  in  its  production. 


Judging 
Require- 
ments 


30% 
PROEIT 

100%     1 

SELLING   S 

PRICE       • 

SELLING  EXP 

70% 

rOTAL  COST 

20% 
INDIRECEEXR 

EMTORYCOST 

20% 
LABOR 

3S% 
PRIME  COST 

MATER/flL 

Fig.  3 
Diagram  Illustrating  the  Building  of  Costs. 


The  diagram  in  Figure  3,  illustrates  the  building  up  The  Cost 
of  the  cost  of  an  article  to  the  price  at  which  it  can  be  sold     ^^^ram 
with  a  profit.     It  will  be  noted  that  material  and  labor, 
represented  by  15  and  20  per  cent  of  cost  respectively, 
make  up  the  prime  or  flat  cost,  which  is  35  per  cent.    Then 
this  prime  or  flat  cost  plus  the  indirect  expense  of  20  per 


COST    KEEPING    SHORT    CUTS 

Judging  cent  gives  the  final  factory  cost,  which  is  55  per  cent.  The 
^ments  ^^^^  factory  cost  plus  the  selling  and  administrative 
expense  of  15  per  cent  gives  the  total  cost  of  70  per  cent, 
and  the  total  cost  of  70  per  cent  plus  the  profit  of  30  per 
cent  gives  the  selling  price  of  100  per  cent.  A  careful 
study  of  this  diagram  will  explain  clearly  the  various 
elements  that  go  to  make  up  the  selling  price  of  a 
commodity. 

Remember,  that  the  cost  of  goods  when  placed  in  the 
shipping  room,  does  not  include  the  expense  necessary  to 
market  the  product.  Manufacturing  costs  and  selhng 
costs  are  two  separate  and  distinct  propositions  and 
must  not  be  confused  with  one  another.  By  fixing  this 
fact  firmly  in  mind  at  the  outset  much  trouble  will  be 
avoided. 


M 


CHAPTER  XI 

Handling  Material;  Perpetual  Inventory 
Suggestions 

THE  cost  of  material  is  comparatively  easy  to  obtain. 
The  price  paid  for  it  depends  on  the  market.     To 
this  is  added  all  charges  in  connection  with  hand- 
ling it.     Therefore  when  the  amount  required  to  make  a 
certain  number  of  articles  is  definitely  known,  it  can  be 
charged  up  at  the  same  rate  at  which  it  was  purchased. 

We  have  already  pointed  out  that  raw  material  is 
divided  into  direct  and  indirect.  The  direct,  in  some 
cases,  is  divided  into  accessory  material  and  finished 
material.  Thus,  a  plant  manufacturing  a  commodity 
made  up  of  a  large  number  of  stamped  parts  would  con- 
sider cold  rolled  steel  or  metal  sheets  as  part  of  its  raw 
material,  while  the  plant  that  manufactures  cold  rolled 
steel  would  consider  pig  iron  as  raw  material,  and  the 
furnace  in  turn  that  manufactures  pig  iron  would  consider 
iron  ore  as  raw  material.  Therefore,  the  raw  material 
in  any  plant  is  the  material  as  it  is  received  before  any 
change  has  been  made  in  it. 

Even  finished  parts,  if  received,  are  classed  with  the 
raw  material  which  goes  into  the  make-up  of  a  commodity. 
Thus  a  furniture  manufacturer  would  class  with  his  raw 
material  such  items  as  handles,  knobs,  casters,  etc. 

Accessory  material  is  that  which  does  not  go  into  the 
product  itself  but  is  used  in  its  manufacture.  In  this 
class  fall  such  items  as  tool  steel  out  of  which  certain  tools 
are  made,  repair  material,  etc. 

The  market  may  fluctuate,  it  is  true,  but  still  the  mean 
or  average  price  of  material  is  easy  to  determine. 

Some  factories  contract  for  a  year's  supply  of  raw 
material  at  a  fixed  rate  and  in  this  way  the  market 

56 


COST    KEEPING    SHORT    CUTS 

Handling  fluctuations   have   no    effect   upon    the    cost,   except  at 
Material  i  •    .  i 

long  intervals. 

The  operations  necessary  in  handling  raw  material 
are  its  purchase,  storage  and  subsequent  distribution 
through  the  factory. 

The  cost  authorities  seem  united  in  favor  of  the 
perpetual  inventory  as  a  system  for  handling  material. 
Some  of  the  most  successful  say:  Perpetual  inventories 
are  undoubtedly  the  best,  because  by  them  we  are  able 
to  keep  an  exact  record  of  stock  on  hand;  we  know  the 
minute  we  arrive  at  a  point  where  it  is  advisable  to  place 
orders  for  new  stock  so  that  no  part  of  the  supply  may 
become  exhausted  before  a  new  supply  is  in  hand. 

Perpetual  inventories  require  perpetual  attention. 
The  difficulties  in  handling  them  have  been  largely  due 
to  lack  of  attention  upon  the  part  of  employes.  There 
are  some  very  simple  rules  that  should  be  noted. 
Constant  First — No  material  should  be  permitted  to  leave  the 
raw  stock  room  without  a  requisition,  signed  on  behalf 
of  the  department  where  it  is  to  be  used. 

Second — All  requisitions  must  be  checked  up  each 
night  before  closing,  and  for  that  purpose  an  hour  should 
be  established  in  the  afternoon,  after  which  all  requisitions 
of  the  day  should  be  filled  the  first  thing  in  the  morning. 

Third — Low  water  marks  should  be  established  by 
which  the  Supply  Clerk  can  be  protected,  and  the  Pur- 
chasing Agent  can  be  warned  of  the  possible  exhaustion 
of  the  supply. 

Fourth — A  large  low  water  mark  should  be  placed  on 
each  kind  of  raw  material  so  that  the  Purchasing  Agent 
may  have  sufficient  time  to  get  new  estimates  before 
ordering  a  new  stock  of  material. 

Fifth — Perpetual  inventory  records  should  be  treated 
as  cash  is  treated.  Cash  is  verified  often,  or  should  be, 
so  inventory  should  have  regular  periods  for  verification. 

56 


Attention 


COST    KEEPING    SHORT    CUTS 

The  perpetual  inventory  of  raw  stock  or  raw  and  semi-  Handling 
finished  stock  constitutes  only  a  part  of  a  complete  factory 
stock  inventory,  because  there  is  always  a  great  deal  of 
stock  in  process  of  construction. 

Since  every  hour  of  labor  expended  on  raw  or  semi- 
finished stock  enhances  its  value,  it  is  obvious  that  all 
stock  in  process  of  manufacture  will  be  worth  considerably 
more  than  the  raw  or  semi-finished  stock.  Furthermore, 
the  stock  in  process  will  not  be  indicated  on  the  perpetual 
inventory  record  since  it  is  charged  off  the  card  when 
requisitioned  by  the  factory  foreman. 

Therefore,  it  is  necessary  to  rely  on  the  cost  records  to 
get  an  accurate  value  of  stock  in  process.  This  is  easily 
accomplished  by  noting  the  various  departments  through 
which  the  stock  or  material  has  passed  up  to  the  time  of 
the  inventory  and  then  figuring  the  labor  cost  and  burden 
expended  and  adding  to  this  the  value  of  the  material  as 
indicated  on  the  requisitions,  carbon  copies  of  which  are 
always  sent  to  the  cost  department. 

Thus  by  co-ordinating  the  perpetual  stock  records  Raw  and 
with  the  cost  department  records  the  value  of  raw  and  gtock 
semi-finished  stock  and  of  stock  in  process  can  be  obtained 
with  a  great  degree  of  accuracy. 

The  individual  stock  card  for  each  class  of  material 
applies  equally  well  to  raw  stock  and  semi-finished  stock. 
Thus,  in  a  factory  that  makes  parts  from  raw  material 
and  then  assembles  machines  from  those  parts  into  com- 
plete machines  or  other  product,  two  sets  of  perpetual 
inventory  cards  are  kept,  one  for  raw  material  and  one  for 
the  finished  parts  or  semi-finished  material.  Both  sets  of 
records  are  kept  in  the  way  described  above.  See  Figures 
67  and  68  for  Finished  Stock  Records. 

In  the  proper  recording  of  all  material,  one  of  the  best 
forms  of  record  is  a  perpetual  stock  card.  This  consists 
of  a  suitable  card  for  each  class  of  raw  material  and  on  it 


COST        KEEPING         SHORT        CUTS 


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COST   KEEPING    SHORT    CUTS 


is  recorded  the  amount  of  material  and  the  date  when  it  Handling 
is  received.  The  distribution  of  the  material  is  made  on  ^*^^*^ 
receipt  of  requisition  blanks,  which  give  the  amounts 
taken  from  the  stock  room  and  show  the  job  to  which 
the  material  is  to  be  charged.  These 
amounts  are  deducted  from  the  bal- 
ances on  their  respective  stock  record 
cards.  This  gives  the  factory  a  per- 
petual inventory  of  all  the  different 
kinds  of  raw  material  remaining  in  the 
stock  room. 

The  use  of  an  adding  machine  not 
only  expedites  the  work,  but  assures 
its  accuracy.  In  Figure  4  is  shown  the 
stock  record  card  used  in  a  factory  for 
recording  each  kind  of  stock.  It  is 
checked  up  with  the  adding  machine 
as  follows : 

When  a  suflScient  number  of  requi- 
sitions have  been  given  to  fill  the  col- 
umn of  "amounts  issued,"  the  stock-  - 
keeper  takes  the  adding  machine  and 
adds  up  the  different  amounts  that 
have  been  received  together  with  the 
original  balance.  In  the  illustration 
on  this  page  the  total  of  amounts  re- 
ceived and  the  original  balance  as 
secured  with  the  adding  machine  is 
35,3733^  pounds,  the  whole  numbers  ' 
and  fractions  being  added  at  the  same 
time.  Then  he  adds  the  amounts 
issued,  securing  a  total  of  15,7393^ 
pounds,  and  deducts  this  total  from 
the  total  amounts  received.  If  the 
remainder  corresponds  to  his  last  bal- 
ance  (19,633%),  he  knows  that  the 


'1^ 

1  3  5.8  7% 

1  9  .7  4     • 

1  1  5  .8  4 

6  5.0  9 

1  7.1  9 

3  5  3.7  3%  ;• 

2  4.0  0 

1.3  0 

2.6  3 

.2  0" 

1  3.4  0 

1  3.0  1 

.1  0 

.3  0 

1  0.2  b% 

1  8.5  0 

1  4.6  7 

1  2  .2  3       • 

.4  0 

1  1.3  0 

.1  0 

4.2  6 

2.8  0 

2  7.7  4 

.1  0 

.1  0 

1  5  7.3  9%  - 

S0 


COST    KEEPING    SHORT    CUTS 

Handling  column  of  balances  has  been  properly  extended  and  can, 
a  eria  ^j^gj-gf^i-e,  carry  the  last  balance  forward  to  the  back  of 
the  card,  knowing  that  his  work  is  exactly  right. 

On  each  requisition  is  recorded  the  kind  of  stock  used, 
the  price,  the  date  it  was  withdrawn,  the  part  into  which 
it  was  made  and  any  other  information  necessary  to 
show  exactly  where  and  for  what  the  raw  material  was 
used.  By  indicating  on  each  requisition  the  job  number 
or  symbol,  it  is  an  easy  matter  to  find  the  material  cost 
of  a  job  by  adding  up  the  requisitions  bearing  any 
particular  job  number.  This  is  done  very  quickly  and 
accurately  with  an  adding  machine. 


CHAPTER  XII 
Handling  Labor  Costs 

THE  cost  of  labor  constitutes  a  large  part  of  the  total 
cost  of  any  commodity.  It  also  embraces  the 
greatest  amount  of  detail  work  because  it  is  neces- 
sary, not  only  to  ascertain  the  labor  cost  of  every  article, 
but  to  record  various  kinds  of  data  relative  to  the 
efficiency  of  workmen,  which  is  obtained  from  their  labor 
distribution  tickets. 

No  matter  how  many  different  jobs  or  parts  of  jobs 
any  one  man  may  work  on,  he  is  paid  for  the  work  and 
his  work  contributes  toward  the  building  of  a  certain 
product.  For  this  reason,  it  is  necessary  to  keep  an 
accurate  record  of  all  the  time  he  devotes  to  the  job  and 
the  amount  he  earns,  the  nature  of  this  record  of  course 
depending  upon  the  wage  plan  used  at  the  factory. 

One  of  the  greatest  leaks  in  connection  with  labor  cost 
is  due  to  the  workman's  loss  of  time,  either  on  account  of 
getting  started  on  new  jobs  slowly  or  on  account  of 
"soldiering."  Therefore,  in  finding  the  cost  of  labor  with 
a  view  to  cutting  it  down  as  much  as  possible  it  is  essential 
that  such  loss  of  time  should  show  up  on  the  records. 

All  the  necessary  information  for  compiling  this  data  is 
given  on  labor  distribution  tickets.  On  these  are  recorded 
the  job  number,  the  date,  the  workman's  number,  and  the 
time  required  to  complete  a  job  together  with  the  earnings. 

In  handling  these  an  adding  machine  is  almost  indis- 
pensable. 

Obtaining  the  total  cost  of  each  job  is  only  one  of  the 
operations  necessary  in  connection  with  labor  tickets. 
They  must  be  handled  several  times  and  a  great  deal  of 
adding  and  listing  is  necessarily  done!  For  instance,  the 
total  cost  of  a  job  must  be  obtained.  Then  the  total  cost 
of  manufacturing  by  departments,  the  total  amount  to  b^ 

61 


COST 


KEEPING 


SHORT 


CUTS 


-4^//.  e^ 


^/f  £o 


^3/.2o 


■^/6.2/ 


■4!i^Zo.oo 


^e/s-o 


^36.27 


LfiBOR 

co>s7: 

T'/'/rre 

/frnounf: 

8^4 

■5f 

2.3  5 

8 'A 

2.0  1 

12 

3.7  9 

6 

1.5  0 

16 '/a 

4.7  7 

1  6% 

4.9  3 

1  0 

3.0  0 

7  8  'A 

2  2.3:5^* 

Fig.  5  . 

Diagram  showing  the  increase  in  value  of  raw  material  as  it  passes  through 

diflFerent  departments  and  an  example  of  adding  machine  work, 

where  time  and  amounts  are  listed  and  the  two 

totals  obtained  at  one  operation. 


«« 


COST    KEEPING    SHORT    CUTS 

charged  to  the  numerous  manufacturing  accounts  and  Handling 
checking  up  the  pay  roll,  etc.,  and  various  other  recapitu-  Costs^ 
lations  are  necessary. 

It  is  in  this  connection  that  the  adding  machine  comes 
in,  not  only  as  a  time  and  labor  saver  but  for  proving  the 
accuracy  of  the  work.  Items  that  are  listed  can  easily  be 
checked  and  verified. 

The  accompanying  diagram,  Figure  5,  gives  a  general 
idea  of  the  detail  work  necessary  to  figure  the  cost  of  labor. 

The  order  for  a  job  originates  in  the  superintendent's 
office.  One  of  his  clerks  makes  out  a  requisition  for  the 
necessary  material  and  sends  it  to  the  Raw  Stock  room. 
This  notifies  the  Raw  Stock  keeper  that  a  job  has  been 
started  and  that  certain  material  will  be  used.  It  also 
gives  him  authority  for  honoring  the  foreman's  requisition 
for  the  material. 

A  production  order  describing  the  job  is  sent  to  the  Starting 
foreman  of  the  department  where  the  first  operation  is  to  *  ^   ^ 
be  done.     A  cost  card,  also  describing  the  job  and  showing 
the  cost  of  the  material,  is  sent  to  the  Cost  Department. 

The  foreman  in  Department  1  then  draws  all  the  ma-   - 
terial  or  part  of  it,  as  the  case  may  be,  and  begins  the  job. 

The  material  in  this  case  is  worth  $11.85.  Depart- 
ment 1  does  $2.35  worth  of  work  on  it,  thereby  increasing 
its  value  to  $14.20  exclusive  of  Burden,  which  is  ignored 
in  this  instance.  The  partly  finished  job  is  then  sent  to 
Department  2  and  a  time  ticket  for  operation  No.  1 
showing  $2.35  is  sent  to  the  Cost  Department. 

Department  2  does  $2.01  worth  of  work  on  the  job 
and  thereby  increases  the  value  of  the  material  to  $16.21. 
A  time  ticket  showing  the  labor  cost  of  $2.01  is  sent  to  the 
Cost  Department. 

The  material  passes  on  in  this  way  to  all  the  depart- 
ments, which  send  their  time  tickets  to  the  Cost  Depart- 
ment, Department  No.  7  finishes  the  job,  which  is  now 
worth  $34.20,  and  turns  it  into  the  Finished  Stock  room. 


COST    KEEPING    SHORT    CUTS 

Handling  The  Cost  Department  then  sorts  the  tickets  per- 
Costs  taining  to  the  job  from  the  many  others  that  have  been 
sent  in  arid  adds  the  hours  and  amounts  on  the  Burroughs 
Cost  Machine.  This  gives  the  labor  cost  for  the  job  and 
the  time  required  for  its  completion,  the  hours  and 
amounts  are  added  and  listed  at  the  same  time  with  this 
machine.  The  two  totals  are  printed  by  pressing  the 
total  button  and  pulling  the  handle. 
The         It  is  obvious  that  the  Cost  Department  will  handle 

urroug  s  ^^j^^  ^^  accumulation  of  tickets  in  order  to  get  the  total 
labor  cost  of  all  jobs,  and  it  is  for  this  reason  that  the 
adding  machine  is  so  exceedingly  useful. 

The  foregoing  gives  a  general  idea  of  what  is  necessary 
for  figuring  cost  of  labor.  The  other  recapitulations  of 
labor  tickets  by  departments  for  figuring  Burden  by 
accounts,  for  figuring  labor  distribution  and  so  forth 
necessitate  an  equally  large  amount  of  adding.  A  more 
complete  outline  of  the  work  is  ^iven  later  in  the  descrip- 
tion of  the  cost  system  used  by  the  Burroughs  Adding 
Machine  Company. 


n 


CHAPTER  XIII 
Indirect  Expense  or  Burden 

THE  question  of  computing  and  distributing  the  Indi- 
rect Cost  or  Burden,  which  constitutes  from  twenty- 
five  to  two  hundred  and  fifty  per  cent  of  the  total 
cost  of  a  finished  product,  according  to  the  nature  of  the 
product  and  the  conditions  under  which  it  is  manufactured, 
is  one  of  the  most  puzzhng  questions  involved  in  costs. 

At  the  outset  it  must  be  distinctly  understood  that 
there  is  a  difference  between  Factory  Burden  and  Selling 
Expense.  The  former  has  to  do  with  the  productive 
cost  of  the  goods,  the  latter  is  separate  and  apart  and  is 
confined  to  putting  the  goods  on  the  market. 

Factory  cost,  which  includes  Burden,  is  the  value  of 
the  product  when  it  is  turned  into  the  warehouse  or 
shipping  room.  The  selling  expense  cannot  be  included 
in  this  value  because  it  would  inflate  it  by  just  that  much 
and  give  an  erroneous  asset  on  the  balance  sheet  when 
inventory  is  taken. 

If  the  general  manager  of  a  manufacturing  concern 
looks  after  the  selling  and  his  assistant  looks  after  the 
manufacturing,  the  salary  of  the  former  goes  into  selling 
expense  and  the  salary  of  the  latter  goes  into  burden  as 
part  of  the  factory  cost.  While  he  does  not  handle  the 
product  personally,  his  expense  to  the  factory  is  necessary 
in  supervising  its  manufacture  and  must  be  included  as 
part  of  the  cost. 

In  short,  the  whole  object  of  burden  distribution  is 
to  allocate  the  charges  which  constitute  it  in  such  way 
that  every  department  in  the  factory  will  bear  its  pro- 
portionate share.  When  this  has  been  done,  the  cost 
keeper  can  tell  to  a  very  close  figure  the  cost  of  every 
article,  whether  it  has  been  handled  by  all  departments 
or  by  only  one  or  two  of  them. 

65 


COST    KEEPING    SHORT    CUTS 

Indirect        Burden    includes    every    expense    necessary    to    the 
^^^^11  manufacture  of  an  article  outside  of  the  direct  labor  cost 
Burden  and  cost  of  material.     The  numerous  elements  that  make 
up  Burden  are  given  in  the  following: 

1 — Indirect  Labor. 

2 — Repairs  and  Maintenance. 

3 — Heating,  Lighting,  Rent,  etc. 

4 — Taxes. 

5 — Insurance. 

6 — Depreciation. 

Indirect  Labor  includes  the  labor  of  all  the  men  and 
boys  about  the  factory  who  do  not  work  directly  on  the 
product.  The  superintendent's  salary  comes  under  this 
classification,  likewise  that  of  his  assistants  and  foremen. 

Since  it  is  usually  necessary  to  have  a  building  in 
which  to  make  goods,  the  cost  of  supplying  it  with  heat, 
light,  power,  etc.,  must  go  into  Burden.  If  the  building 
is  rented,  the  rent  is  included  in  Burden.  In  like  manner 
taxes,  insurance  and  maintenance  are  included  in  Burden. 
Spread-  In  spreading  Burden  it  is  the  best  practice  to  divide 
Bifrden  ^^^h  element  on  a  monthly  basis  so  that  any  changes  in- 
factory  conditions  tending  to  raise  or  lower  it  can  be  more 
quickly  and  easily  adjusted. 

For  example,  if  the  heating  of  a  factory  costs  $1200 
a  year,  this  element  of  Burden  will  be  divided  into  twelve 
parts  and  spread  over  the  factory  departments  on  the 
basis  of  $100  per  month.  In  subdividing  the  $100  for 
each  department  the  total  cubical  contents  of  the  factory 
is  taken  and  each  department  receives  a  part  of  the 
Burden  which  is  proportionate  to  its  contents.  Thus,  if 
a  factory  has  a  total  of  150,000  cubic  feet  and  Department 
"A"  has  30,000  cubic  feet,  this  department  will  receive 
30,000-150,000  of  the  $100,  which  is  $20. 

Rent,  taxes  and  insurance  are  distributed  in  the  same 
general  way. 

Indirect  labor,  depreciation  and  repairs  and  main- 
tenance, however,  must  be  proportioned  according  to  the 


COST    KEEPING    SHORT    CUTS 

jimount  of  each  that  is  incurred  by  a  department,  because  Indirect 
it  is  a  rare  exception  when  every  department  of  a  factory  ^^^^^'^^^ 
will  require  a  part  of  Burden   that  is  proportionate  to  Burden 
its  size. 

After  the  Burden  has  been  spread  over  the  departments 
on  the  monthly  basis  it  is  distributed  to  the  product 
according  to  one  or  more  of  the  methods  which  are  de- 
scribed on  the  following  pages. 

These  elements  of  Burden  are  comparatively  easy  to 
ascertain  and  can  be  spread  over  the  various  manu- 
facturing departments  with  sufficient  accuracy  for  all 
practical  purposes. 

But  depreciation,  which  is  also  an  element  of  Burden, 
is  different,  and  requires  more  study,  care  and  experience 
in  its  calculation  than  all  the  other  elements  put  together. 

Depreciation  applies  both  to  buildings  and  equipment,  Depre- 
the  amount  to  be  charged  off  depending  on  several  con-  ^^^^^^^. 
ditions.  For  instance,  a  frame  building  is  comparatively 
short  lived,  while  a  building  made  of  concrete  and  steel 
endures  for  many  years.  Therefore,  a  higher  rate  of 
depreciation  must  be  charged  off  for  a  frame  building 
than  for  a  concrete  steel  building.  On  the  other  hand, 
the  difference  in  these  rates  will  not  be  so  great  as  the 
difference  in  the  structure  would  indicate.  The  frame 
building  may  be  made  of  good  timber  and  contain  light, 
smooth-running  machinery,  while  the  concrete-steel  build- 
ing may  contain  heavy,  vibrating  machinery. 

From  this  it  will  be  seen  that  the  nature  of  the  building 
itself  is  not  all  that  must  be  considered  in  fixing  a  rate  of 
depreciation.  Ordinarily  the  rates  for  factory  buildings 
are  from  2  per  cent  to  6  per  cent,  depending  upon  local 
conditions,  the  kind  of  structure  and  the  nature  of  the 
work  going  on  within  the  walls. 

In  the  case  of  machinery,  the  percentage  covers  a 
broader  range  running  from  ^}/2  per  cent  to  1^3^  per  cent. 

67 


COST    KEEPI  N  G    SHORT    CUTS 

Indirect  This  also  depends  upon  the  amount  and  kind  of  work  the 
^^^°Q^  machine  is  called  upon  to  do  and  requires  close  observa- 
Burden  tion  and  experience  to  determine. 

It  has  been  observed  that  some  machines  depreciate 
rapidly  the  first  year  or  two,  and  after  that  at  a  much 
slower  rate,  while  others  depreciate  very  slowly  for  the 
first  few  years  and  then  seem  to  go  to  pieces  at  once. 

Again,  some  machines  can  be  operated  in  a  more  or 
less  dilapidated  condition  while  others  must  always  be 
in  the  best  running  order. 

There  are  other  considerations  in  fixing  depreciation 

aside    from    actual    wear    and    tear.     Maintenance    or 

upkeep  has  a  direct  bearing  upon  depreciation  in  that  an 

effectual  maintenance  from  year  to  year,  especially  on 

certain  kinds  of  machinery,  affects  in  large  measure  the 

loss  due  to  depreciation 

Reserve        Thus,  if  a  machine  worth  $1,000  depreciates  at  the 
Account  ^^^^  ^j  -^p  p^j.  ^^^^  p^j.  yg^j.  j^  ^jjj  1^^  ^^j.^j^  ^gQQ  ^^  ^Yie 

end  of  the  first  year,  and  $100  will  be  set  aside  as  a  reserve 
to  take  care  of  the  depreciation.  If,  however,  $50  is 
spent  in  repairs  to  the  machine  which  restores  it  to  a 
condition  practically  as  good  as  new,  it  is  the  general 
practice,  except  in  very  conservative  concerns,  to  take 
this  $50  from  the  $100  depreciation,  reserve  fund  instead 
of  charging  this  item  of  repairs  to  General  Expense. 

Then  the  stability  of  the  machinery  as  regards  up-to- 
dateness  must  be  considered,  because  in  some  manufac- 
turing businesses  methods  are  improving  so  constantly  and 
new  style  machinery  is  required  so  frequently  that  a  much 
higher  rate  of  depreciation  must  be  used.  There  are 
cases  where  a  machine,  practically  as  good  as  new,  must 
be  scrapped  on  account  of  a  more  improved  machine 
coming  on  the  market.  Obviously  the  rate  of  deprecia- 
tion in  such  cases  is  exceptionally  high. 

The  problem  of  depreciation  is  further  complicated  by 
the  fact  that  a  business  itself  may  not  be  permanent,  yet 


COST    KEEPING    SHORT    CUTS 

it  may"  require  some  highly  specialized  machinery,  in  Indirect 
which  event  a  decreasing  demand  will  mean  a  decreasing  ^j.^^*^"^^ 
value  of  the  plant.  Burden 

Summing  up  a  few  of  the  many  points  necessary  to 
consider  in  fixing  a  rate  of  depreciation,  we  mention : 

First — The  nature  of  goods  manufactured,  whether 
staple,  specialty  or  novelty. 

Second — The  kind  of  machinery  used,  heavy  or  light, 
fast  or  slow  moving. 

Third — The  kind  of  buildings  used  and  the  nature  of 
the  work  within  them. 

Fourth — The  location  of  the  plant  regarding  increase 
or  decrease  in  value  of  property. 

Fifth — The  nature  of  maintenance  or  upkeep. 

Sixth — The  exposure  of  equipment  to  the  elements. 

Seventh — The  permanence  in  style  of  machinery  and 
equipment. 

At  first  sight  it  would  seem  an  almost  hopeless  under-  Available 
taking  to  fix  a  rate  of  depreciation  with  anything  like  fnce^"" 
accuracy;  but  fortunately  there  are  a  great  many  concerns 
similar  in  the  nature  of  their  product,  whose  experience 
can  be  studied  and  compared.  Then,  the  Fire  Insurance 
Companies,  who  base  their  risks  on  depreciated  values, 
have  evolved  from  their  large  experience  certain  principles 
governing  depreciation  which  can  be  relied  on  as  giving 
very  good  results. 

In  ;'egard  to  the  prorating  of  depreciation  over  the 
various  manufacturing  departments  in  a  factory  it  may 
be  well  to  mention  that  the  best  practice  consists  in 
dividing  the  annual  depreciation  into  twelve  parts,  so 
that  a  certain  amount  can  be  included  in  the  factory 
burden  each  month.  Thus,  if  a  $60,000  plant  has  a 
depreciation  of  10  per  cent  per  year,  instead  of  charging 
off  $6000  at  the  end  of  the  year,  divide  this  amount  by 


C    O    S    T         K    E    E    PING         S    II    O    K    T         CUTS 

Indirect  12  and  charge  off  $500  monthly  as  part  of  Factory 
xpense  g^J.^gJJ  gy  treating  depreciation  in  this  way  the  true 
Burden  production  cost  is  secured  every  month. 

So  much,  in  a  general  way,  for  the  different  elements 
that  go  to  make  up  Burden.  We  will  now  briefly  describe 
the  different  methods  of  distributing  it  over  the  product. 
These  methods  are  very  important  in  determining  the 
best  way  to  get  at  the  cost  of  a  product. 


70 


CHAPTER  XIV 
Distribution  of  Burden 

BURDEN  may  be  distributed  in  many  different  ways 
and  the  right  way  can  be  decided  upon  only  after 
a  study  has  been  made  of  the  conditions  in  the 
factory  where  the  cost  system  is  to  be  installed. 

The  following  methods  of  distributing  burden  are 
most  commonly  used: 

1 — Direct  Labor  Cost  Method. 

2 — Direct  Labor  Hours  Method; 

'J — Direct  Labor  and  Material  Method. 

4 — New  Machine  Rate  Method. 

5 — Fixed  Machine  Rate  Method. 

C— New  Pay  Rate  Method. 

A  knowledge  of  the  general  principles  on  which  these 
methods  are  based  will  give  a  better  insight  to  the  method 
best  adapted  to  your  business. 

It  is  important  to  use  the  most  economical  and  effect- 
ive system,  but  there  are  one  or  two  easy  methods  that 
work  out  to  fallacious  results  and  are  therefore  bad. 

Spreading  a  fixed  blanket  burden  over  all  departments 
is  essentially  wrong  in  principle,  because  the  article,  for 
instance,  going  through  two  departments  should  not  bear 
the  same  indirect  expense  as  that  which  goes  through  six. 
It  will  generally  be  found  that  figuring  an  indirect  expense 
on  a  percentage  principle  leads  to  false  conclusions,  and 
it  is  important  not  to  have  false  conclusions  in  any  system 
which  attempts  to  be  accurate. 

For  instance,  it  was  found  to  be  a  poor  system  that 
distributed,  as  part  of  a  blanket  burden,  the  salary  of  a 
General  Manager  who  devoted  his  time  to  the  selling  end 
of  the  business.  The  result  was  an  inflation  of  the  value 
of  finished  stock  because  the  indirect  labor,  which  was 

71 


COST    KEEPING    SHORT    CUTS 

Distribu-  part  of  selling  expense,  had  been  included  in  the  Cost  of 
Burdeii  Production,    and    distributed    without    reference   to    the 
department  in  which  it  was  employed. 

In  figuring  burden  the  growth  and  alteration  in  the 
factory  or  the  changes  of  processes  should  always  be  taken 
into  consideration.  For  this  reason  it  is  advisable  to 
prorate  overhead  charges  monthly,  so  that  the  burden 
rates  can  be  checked  monthly,  or  at  least  every  three 
months.  Under  average  running  conditions  the  rate  will 
undoubtedly  fluctuate,  but  the  fluctuation  can  usually  be 
attributed  to  some  specific  cause.  In  cases  of  improved 
methods  of  manufacture,  the  monthly  or  quarterly  burden 
test  will  show  the  rate  so  much  altered  that  a  change  will 
be  necessary  in  order  to  distribute  the  correct  amount  of 
burden. 
Direct  The  Direct  Labor  Cost  Method  of  figuring  burden 
Cost  ^^  ^^^  ^^  ^^^  most  generally  used  on  account  of  its 
Method  simplicity.  It  is  based  on  the  principle  that  the  product 
increases  in  value  as  labor  is  added  to  it  and  consequently 
the  greater  the  amount  of  labor  applied  to  its  manu- 
facture, the  greater  will  be  the  expense  of  supervision  and 
management. 

The  method  of  obtaining  the  ratio  of  indirect  expense 
to  labor  cost  is  very  simple,  the  process  involving  the  divi- 
sion of  the  total  amount  of  indirect  expense  by  the  total 
amount  paid  for  labor  during  the  same  period  of  time. 
In  other  words,  if  the  total  indirect  expense  for  one  month 
is,  say  $7,000,  and  the  total  expense  of  labor  for  the  same 
period  is  $9,200,  the  per  cent  of  burden  to  be  dis- 
tributed over  the  different  articles  will  be  7,000^9,200 
or  76  per  cent. 

This  extra  charge  is  added  to  the  articles  made  during 
the  same  period.  In  this  way  each  article  is  charged  with 
a  certain  part  of  the  indirect  expense  of  the  entire  plant, 
the  amount  varying  according  to  the  cost  of  labor  put 
upon  it.     Thus  if  an  article  has  $1.25  worth  of  labor  put 


COST    KEEPING    SHORT    CUTS 

into  its  manufacture  and  the  material  cost  is  75  cents,  Distribu- 
according  to  the  above  ratio,  76  per  cent  of  $1.25,  which  is  purfjen 
95  cents,  is  added  as  burden,  making  the  total  cost  $1.25 
(labor),  plus  75  cents  (material),  plus  95  cents  (burden). 
The  same  principle  is  used  in  distributing  the  total  burden 
of  $7,000  over  the  various  articles  manufactured. 

The  different  departments  of  a  factory  may  vary  con- 
siderably in  their  process  and  equipment  and  if  the  nature 
of  the  article  is  such  that  it  passes  through  many  different 
operations,  it  is  almost  certain  that  the  indirect  expense 
in  some  of  the  departments  will  be  greater  than  in  others. 
Again,  certain  articles  may  be  completely  finished  in  one 
department  while  others  pass  through  several  depart- 
ments, and  the  indirect  expense  of  the  one  department 
may  be  far  greater  than  the  average  indirect  expense  of 
the  other  departments.  In  this  case  a  general  average  of 
all  the  departments,  including  the  one,  will  be  lower  than 
the  expense  of  the  one  department  and  hence  the  true  cost 
of  the  article  manufactured  in  that  department  will  not  be 
obtained. 

Where  departmental  conditions  are  different  and  an  The 
average  rate  is  used,  it  is  evident  that  the  extra  indirect  R^te^^^ 
cost  of  manufacture  in  certain  departments  will  be  loaded 
on  other  departments  where  the  expenses  are  not  so 
heavy.  While  an  average  rate  will  give  the  cost  of  all 
the  articles  combined,  under  these  conditions  it  cannot 
give  accurately  the  cost  of  each  individual  article.  This 
information  is  necessary  in  fixing  selling  price. 

Another  phase  in  connection  with  this  method  is  that 
the  rate  of  paying  all  the  workmen  is  not  always  pro- 
portional to  the  indirect  expense,  because  a  man  working 
for  $1.75  a  day  will  oftentimes  incur  more  indirect  expense 
than  the  man  who  earns  from  $3.00  to  $3.50  a  day.  An 
example  of  where  this  may  occur  is  found  where  a  cheap 
workman   is   operating   an   expensive   machine   and   an 

73 


COST    KEEPING    SHORT    CUTS 

Distribu-  expensive  workman  is  operating  a  cheap .  machine.     In 
Burden  ^^^^  former  case,  the  overhead  charge  will  be  too  small  and 
in  the  latter  it  will  be  too  great. 

Again,  if  a  manufacturer  is  fighting  competition  with 
certain  articles,  such  a  method  of  adding  burden  will 
not  give  the  exact  cost  of  those  articles  and  hence  it  will 
be  impossible  to  fix  accurately  their  selling  price  with  a 
view  to  making  sure  profits  on  their  actual  cost. 

Apparently  such  a  method  is  erroneous,  but  the  trouble 
lies  in  the  fact  that  an  average  cannot  be  estimated  on  a 
number  of  different  kinds  of  articles.  If  a  system  that 
is  based  on  wages  is  to  be  operated  successfully,  the  wages 
must  represent  the  true  conditions  of  production  and 
must  be  in  proportion  to  the  actual  cost.  This  condition 
is  found  only  where  labor  is  practically  uniform  as  regards 
production,  wages  and  amount  of  time  consumed  on  each 
operation. 
Applying  To  apply  this  system  successfully,  the  percentage  of 
System  burden  must  be  calculated  by  departments.  In  this  way  a 
close  approximation  to  the  true  cost  of  the  article  can  be 
obtained.  Under  this  method  the  total  indirect  cost  of 
$7,000  for  the  whole  plant  is  divided  up  into  smaller 
amounts  chargeable  to  each  department  and  prorated  to 
articles  manufactured  according  to  the  amount  of  burden 
the  department  incurs  in  performing  its  respective  oper- 
ations upon  them. 

The  diagram.  Figure  6  makes  clear  the  principle  of 
apportioning  burden  departmentally. 

In  this  case  it  has  been  calculated  that  for  each  dollar's 
worth  of  productive  labor  in  Departments  1,  2,  3,  4  and  5, 
a  burden  of  75  per  cent,  67  per  cent,  85  per  cent,  91  per 
cent  and  83  per  cent,  respectively,  shall  be  added  to  the 
direct  labor  cost  of  the  product  in  order  to  obtain  the 
total  factory  cost. 

Thus  a  batch  of  raw  material  conies  to  Department  1 
and  is  valued  at  $12.75.     In  Department  1,  $3.20  worth 


COST 


K    E    E    P    I    N    G 


SHORT 


CUTS 


of  labor  is  done  upon  it.  This  increases  the  vakie  to  Distribu- 
$15.95.  Then  75  per  cent  of  the  labor  cost,  $3.20,  which  is  tmdL 
$2.40,  is  added  to  the  $15.95,  giving  a  total  cost  of  $18.35. 
The  partly  finished  material  is  passed  on  to  Depart- 
ment 2  where  $2.10  worth  of  work  is  done  on  it.  This 
amount  together  with  67  per  cent  of  $2.10,  which  is  $1.41, 
is  added  to  the  $18.35,  increasing  the  value  of  the  partly 
finished  product  to  $21.86. 


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Fig.  6 

Graphic  Illustration  of  the  Labor  Cost  Method  of  Figuring  Burden. 

In  this  way,- the  material  passes  on  through  Depart- 
ments 3,  4  and  5  to  completion  and  is  turned  into  the 
Finished  Stock  Room,  worth  $38.03. 

The  Labor  Distribution  Tickets  made  out  by  each 
department  that  performs  an  operation  on  this  material, 
are  sent  to  the  Cost  Department  and  give  the  labor  cost 
for  each  of  the  operating  departments. 


75 


COST    KEEPING    SHORT    CUTS 

Distribu-         When  the  job  has  been  finished  the  amount  of  burden 
Burden  ^^  ^^  charged  to  the  product  is  calculated  from  data  on 
these  tickets. 

Then  by  adding  to  the  amounts  of  labor  and  burden, 

the  value  of  the  material  used,  the  total  cost  of  the  job 

is  obtained. 

Inven-        There  is  another  very  important  point  in  this  connec- 

Work  in  ^^^^  which  should  not  be  overlooked.     It  pertains  to  the 

Process  inventory  of  work  in  process. 

Suppose,  for  example,  a  batch  of  partially  finished  goods 
has  just  come  to  Department  4  at  the  time  the  inventory 
is  being  taken,  and  it  is  desired  to  find  its  true  value. 

On  the  supposition  that  individual  time  tickets  have 
been  used,  all  such  tickets  relating  to  this  particular  batch 
of  semi-finished  stock,  will  have  been  sent  to  the  Cost 
Department  and  filed  behind  the  cost  card  for  this  job. 
When  the  inventory  clerk  finds  this  semi-finished  stock  in 
Department  4  he  takes  note  of  the  job  or  order  number 
and  reports  to  the  Cost  Department  that  job  so  and  so 
is  in  Department  4  ready  to  go  through  the  operation 
performed  by  that  department. 

The  cost  clerk  then  turns  to  the  cost  card  for  that 

job,  sorts  the  time  tickets  by  departments,  which  in  this 

case  will  be  for  Departments  "1,"  "2"  and  '%"  gets  the 

total  labor  cost  for  each   of  these   three  departments, 

figures  the  burden  for  each  and  combining  these  two 

totals  with  the  value  of  the  material,  obtains  the  true 

cost  of  the  semi-finished  stock  as  it  lies  in  Department  4. 

The  same  method  is  used  for  getting  the  value  of  all 

work  in  process  and  can  be  done  quickly  and  accurately 

when  the  cost  records  are  kept  in  proper  shape.     The 

usefulness  of  the  adding  machine  for  getting  the  labor 

totals  is  obvious. 

Direct        The  Direct  Labor  Hours  Method  is  similar  to  the 

Hours  direct  labor  cost  method,  both  of  them  being  methods 

Method  by  which   the  burden  is  distributed  on  the  basis  of  a 

76 


COST    KEEPING    SHORT    CUTS 

general  average  rate.  The  difference  between  them  is  Distribu- 
that  different  bases  are  used  for  determining  the  burden.  Burden 
This  method  is  based  on  workmen's  time  instead  of  labor 
cost,  the  hour  being  taken  as  the  unit  of  time.  In  other 
words,  the  indirect  expenses  of  a  plant  are  distributed 
according  to  the  hours  worked  by  the  employes  instead 
of  the  wages  they  receive.  A  rate  per  hour  is  obtained 
by  dividing  the  total  indirect  expense  for  a  certain  period 
by  the  total  number  of  hours  for  the  same  period  and  in 
this  way  determining  the  amount  per  hour  to  be  added 
to  the  cost  of  production  in  order  to  get  the  total  cost. 

Thus,  if  the  indirect  expenses  are  $7,000  and  the  total 
number  of  productive  hours  are  50,000,  the  amount  of 
burden  per  hour  would  be  7,000- :-50,000  or  14  cents  per 
hour. 

Applying  this  method  to  the  example  given  under  the 
Labor  Cost  Method  with  the  assumption  that  the  labor 
cost  of  $1.25  represents  5  hours  work,  the  cost  will  be 
$1.25  plus  75  cents  for  material,  plus  5X14  =  70  cents 
burden  or  $2.70,  as  against  a  total  cost  of  $2.95  in  the  case 
of  the  labor  cost  method. 

The  difference  in  the  total  cost  of  these  two  methods  is 
very  easily  explained  since  by  the  first  method  the  amount 
of  burden  varies  according  to  the  amount  of  money  each 
man  earns  but  by  this  method  it  is  distributed  equally 
among  hif!,h.  priced  and  low  priced  men,  the  basis  being 
the  number  of  hours  each  man  works. 

In  the  former  case  the  articles  produced  by  .a  high 
priced  employe  are  charged  a  greater  amount  of  indirect 
expense  than  those  produced  by  a  low  priced  employe. 
Since,  by  the  direct  labor  hour  plan,  the  indirect  expense 
is  divided  equally  between  high  and  low  priced  employes 
on  the  assumption  that  they  work  the  same  number  of 
hours  per  day,  the  two  sets  of  costs  do  not  exactly 
agree. 

77 


COST    KEEPING    SHORT    CUTS 

Distribu-        This  method  of  distributing  burden  also  lends  itself 
Burden  readily  to  accurate  valuation  of  work  in  process  at  inven- 
tory time.     It  is  very  similar  to  the  method  just  described 
under  Labor  Hours  Method. 
Inven-        Under  these  conditions,  however,  it  is  necessary  after 
Work  in  distributing  by  departments  the  time  tickets  pertaining 
Process  iq  q,  job,  to  get  the  total  hours  of  work  put  in  by  each 
department.     Then  the  rate  per  hour  of  burden  for  each 
department  is  multiplied  by  the  total  number  of  hours, 
thus   securing  the  burden  for  each  department.     Then 
these  items  of  burden  are  recapitulated  and  combined 
with  the  value  of  labor  and  material  used  on  the  job  up 
to  the  stage  where  the  inventory  clerk  finds  it,  and  the 
inventory  value  is  obtained. 

The  most  effective  application  of  the  labor  hours 
method  is  found  by  dividing  the  factory  into  departments 
determined  by  similarity  of  machinery  or  processes  and 
calculating  the  hour  rate  according  to  the  number  of 
hours  put  in  by  the  men  in  each  department. 

When  the  general  average  method  is  employed  the 
apparant  cost  of  the  product  may  be  so  far  wrong  that 
the  manufacturer  may  discourage  sales  of  articles  that 
are  making  money  and  encourage  sales  of  others  which 
are  sold  at  an  actual  loss.  These  conditions  are  due, 
of  course,  to  the  fact  that  too  much  burden  is  charged  to 
certain  articles  and  too  little  to  others.  Taken  alto- 
gether, the  direct  labor  hours  method  is  somewhat  more 
accurate'  than  the  direct  labor  cost  method  if  the  work 
is  departmentalized,  unless  the  labor  cost  happens  to  be 
proportional  to  the  true  cost  of  production. 

Both  methods  are  more  or  less  imperfect  as  regards 
accurate  results,  when  applied  to  a  factory  as  a  whole, 
because  they  are  not  based  on  elements  which  represent 
actual  conditions,  except  in  the   case  where  the  product 

78 


COST 


KEEPING 


SHORT 


CUTS 


and  process  are  very  simple  and  uniform.     The  depart-  Distribu- 
mental  method  of  distributing  burden  on  these  plans  is  Burden 
the  only  one  where  accurate  results  can  be  expected. 


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Fig.  7 
Graphic  Illustration  of  Labor  Hours  Method  of  FiguringiBurden. 

The  diagram  in  Figure  7  shows  how  burden  is  appor- 
tioned to  each  operating  department  at  so  much  per  pro- 
ductive hour. 

From  the  diagram  it  will  be  seen  that  Departments  1,  An 
2,  3,  4  and  5  carry  a  burden  rate  of  14,  12,  16,  15  and  18  J""^^""^' 
cents  per  hour  respectively. 

The  raw  material  valued  at  $10.00  comes  into  Depart- 
ment 1  where  8}^  hours  of  labor  are  expended  on  it.  The 
labor  cost  at  20  cents  an  hour  is  $1.70  and  the  burden  at 
14  cents  an  hour  is  $1.19.  Therefore,  when  the  material 
leaves  Department  1,  it  is  worth  $10.00  (raw  material), 
plus  $1,70  (labor  cost),  plus  $1.19   (burden),  or  $12.89, 


tion 


COST    KEEPING    SHORT    CUTS 


Distribu-      •  The  partly  finished  product  now  worth  $12.89  is  sent 

Burden  ^^  Department  2  where  7%  hours  of  work  are  done  upon 

it.     This  increases  its  value  $1.55  (labor  cost  20  cents  per 

hour),  plus  93  cents  (burden),  which  is  added  to  $12.89 

giving  the  partly  finished  product  a  new  value,  $15.37. 

In  this  way  the  product  passes  on  through  depart- 
ments 3,  4  and  5,  each  one  of  which  increases  its  value  by 
so  much  labor  cost  and  so  much  for  burden,  until  it  is 
turned  into  the  Finished  Stock  Room  worth  $21.36. 
Direct        The  Dircct  Labor  and  Material  Method  of  figuring 
^and  burden  is  similar  to  the  labor  cost   method,   with  the 
Material  exception  that  it  takes  the  total  cost  of  labor  and  material 
^    **    as  the  basis  instead  of  the  total  labor  cost  only. 

The  application  of  such  method  is  practical  only  in 
those  cases  where  the  material  constitutes  the  greater 
part  of  the  direct  cost  of  the  product. 

Necessarily  it  is  an  averaging  method  and  if  the  labor 
cost  predominates  it  is  almost  certain  to  give  inaccurate 
results. 

New  The  New  Machine  Rate  Method  is  one  that  provides 
^^^g  for  charging  labor  and  departmental  expenses  direct  to  a 
Method  process  or  machine  so  as  to  show  the  total  cost  per  hour, 
or  per  whatever  unit  of  measure  selected,  of  operating 
the  machine  or  process.  The  expenses  thus  charged 
include  both  those  directly  and  indirectly  related  to  the 
process  or  machine  in  question. 

Having  found  the  total  expense  of  operating  a  machine 
or  process  and  having  reduced  this  rate  to  so  much  per 
hour,  the  article  is  charged  according  to  the  time  that  the 
machine  is  employed  upon  it. 

To  operate  this  plan  with  the  greatest  success,  all 
machinery  must  be  grouped  according  to  similarity  of 
operation  performed  by  it  and  then  each  job  done  by  a 
machine  is  charged  so  much  per  hour  according  to  the 

80     .  .  ' 


COST    KEEPING    SHORT    CUTS 


nature  of  the  operation  performed.     The  rate  for  any  Distribu- 
stated  operation  is  determined  by  close  observation  and  Burden 
exact  prorating  of  the  total  departmental  expense. 

Each  group  of  machines  should  be  considered  a  de- 
partment so  that  the  total  indirect  expense  can  be  more 
accurately  distributed  over  the  product.  If  the  depart- 
ment includes  radically  different  processes,  it  should  be 
subdivided  and  the  department  indirect  expense  prorated 
over  each  division. 

The  more  nearly  alike  the  machine  work  or  process  is 
in  each  department,  the  more  easily  and  accurately  the 
expense  can  be  allocated  and  the  machine  rate  of  burden 
or  process  rate  of  burden  determined. 

After  this  has  been  done,  the  total  time  of  the  workmen, 
the  supplies  and  repairs  are  charged  to  the  operations  or 
processes.  In  addition  to  these  items,  charges  are  made 
for  insurance,  depreciation,  rent  and  all  other  items  in 
any  way  connected  with  the  manufacture  of  the  product. 
Ordinarily,  these  are  indirect  expenses,  but  with  this 
plan  they  are  treated  as  direct.  Each  machine  or  process 
is  operated  as  nearly  as  possible  like  a  complete  little 
factory,  being  charged  with  the  cost  of  labor  to  operate 
it,  the  cost  of  its  repairs,  superintendence,  the  rent  of 
its  floor  space,  the  amount  of  power  it  takes,  etc. 

After  finding  the  total  direct  cost  of  operating  machines 
or  processes,  it  is  necessary  to  find  the  total  number  of 
hours  that  they  are  operated  during  a  certain  period  of 
time,  say  a  month.  In  this  way,  the  cost  per  unit  of 
measure,  whether  it  be  hour,  pound  or  ton,  can  be  calcu- 
lated by  dividing  the  total  direct  expense  by  the  total 
number  of  units. 

When   the   direct   expenses   have   been    figured,   the  General 
general  indirect  expenses  or  those  which  are  not  directly  Expense 
related  to  any  machine  or  process,  are  spread  over  the 
different  departments  on  some   scientific  basis.     These 
are  added  to  department  indirect  expenses.     This  gives 

81 


COST    KEEPING    SHORT    CUTS 

Distribu-  the  total  department  indirect  expense,  which  is  divided 
Burden  3-mong    the    machines  or   processes  of  that  department 
according  to  the  total  number  of  hours  or  other  units  of 
measure. 

The  total  indirect  expense  of  a  department  for  a  cer- 
tain period  is  then  divided  by  the  total  units  of  measure  for 
the  same  period  and  the  rate  thus  obtained  is  applied  to 
the  product  of  the  machines  or  processes.     Thus  all  in- 
direct expense  for  the  department,  as  well  as  pro-rata  of 
general  expense,  is  included  in  the  machine  or  process  rate. 
By  this  plan  machines  or  processes  absorb  nearly  all 
expenses   ordinarily   considered   as   indirect   and   gather 
them  together  so  that  they  can  be  charged  directly  to  the 
product  at  so  much  per  hour  or  any  other  unit  of  measure. 
When        When  these  costs  have  been  collected  and  reduced 
lected  ^^  ^^  much  per  hour  or  pound  for  each  machine  or  process, 
it  is  comparatively  easy  to  charge  the  product  at  this  rate 
according  to  the  number  of  productive  hours  or  the  number 
of  pounds  manufactured. 

If  "time"  is  the  basis  upon  which  the  calculations  are 
made  instead  of  ''quantity"  the  total  indirect  expense 
for  a  month  is  divided  by  the  total  number  of  hours  that 
the  machines  or  processes  have  been  operated  during  the 
month  and  in  this  way  the  rate  per  hour  is  determined. 
This  rate  is  then  multiplied  by  the  total  hours  each 
machine  or  process  has  been  in  operation,  to  get  the  total 
monthly  charge  for  each. 

Thus  direct  and  indirect  expenses  are  charged  to  a 
machine  or  process  and  reduced  to  a  certain  rate  per 
unit  of  measure. 
An  For  instance,  if  material  for  an  article  costs  75  cents 
xamp  e  ^^j  requires  five  hours  to  pass  through  a  certain  process 
at  $1.60  per  hour,  including  direct  and  indirect  expense, 
the  total  cost  will  be  75  cents  plus  $8.00  or  $8.75.  This 
example  illustrates  the  fact  that  all  expenditures  (except 
for  material)  incurred  by  a  machine  or  process  can  be 

82  * 


COST    KEEPING    SHORT    CUTS 

charged  directly  to  the  product.     Thus  the  total  cost  of  an  Distribu- 
article  is  easily  figured  when  the  price  of  the  material,  and  jJurden 
time  required  by  each  machine  or  process  through  which 
it  passes  are  known. 

This  plan  is  one  of  the  most  desirable  because  it  gives 
a  rate  by  which  the  greatest  amount  of  expense  of  manu- 
facture can  be  charged  directly  to  the  product  in  one  item. 

Where  conditions  are  such  that  it  can  be  used,  the 
results  will  be  as  close  to  the  actual  cost  as  it  is  possible 
to  get  them. 

The  inventory  value  is  obtained  by  multiplying  the 
number  of  hours  the  article  has  been  in  process  in  each 
department  by  the  respective  rates  per  hour  for  each 
department.  The  totals  are  then  recapitulated  and  to 
this  grand  total  is  added  the  cost  of  the  material,  giving 
the  inventory  value. 

The  Fixed  Machine  Rate  Method  is  similar  in  some  Fixed 
respects  to  the  new  machine  rate  method.     The  indirect  j^^^^^  ^°^ 
expenses,   however,   are   distributed   differently   by  pro-  Method 
rating  them  over  the  entire  production  on  a  percentage, 
or  some  other  basis,   instead  of  including  them  in  the  . 
operating  cost  of  the  machine. 

The  rate  of  direct  expense  charge  is  calculated  depart- 
mentally  either  from  previous  experience  or  from  an 
analysis  of  current  expenses  and  is  distributed  among 
the  different  machines  operating  in  each  department. 

Charges  are  made  to  the  cost  of  articles  manufactured 
on  the  basis  of  this  rate,  the  total  of  which  is  credited  to 
the  department  expense  account. 

The  general  indirect  expenses  are  not  combined  with 
the  department  indirect  expenses  as  in  the  case  of  the  new 
machine  rate  plan,  but  are  distributed  on  the  basis  of  a 
supplementary  rate,  which  is  applied  to  the  entire  product 
of  the  factory.  Anj^  method  can  be  used  for  this  dis- 
tribution such  as  labor  hours,  labor  cost,  etc. 


COST    KEEPING    SHORT    CUTS 


Distribu-  The  actual  charges  to  be  made  against  each  machine 
Burdwi  ^^^  determined  and  then  any  difference  between  the 
estimated  rate  and  the  actual  charges  is  added  to  or  de- 
ducted from  the  general  indirect  expense  and  distributed 
by  the  supplementary  rate.  Thus,  discrepancies  between 
actual  rate  and  estimated  rate  are  adjusted. 

This  plan  differs  from  the  new  machine  rate  in  that  it 
is  based  on  an  estimate  and  assumes  a  100  per  cent 
efficiency  in  running  the  plant.  When  the  product  is 
charged  only  with  actual  running  time  of  machines,  which 
is  more  likely  to  be  60  or  75  per  cent  of  full  time,  the 
credit  to  departmental  indirect  expense  increases  rapidly, 
and  makes  the  cost  of  production  appear  much  larger 
than  it  actually  is. 

In  order  to  equalize  this  effect,  the  difference  between 
the  indirect  expense  and  the  actual  charges  is  deducted 
from  the  general  indirect  expenses  before  they  are  dis- 
tributed by  the  supplementary  rate.  In  case  the  actual 
charges  exceed  the  estimated  charges  the  difference  is 
Faults  added.  One  of  the  faults  with  this  plan  is  that  the 
Plan  general  indirect  expenses  will  decrease  according  to  the 
amount  of  machinery  lying  idle,  and  it  is  possible  in  this 
way  for  a  major  part  of  the  machinery,  if  idle,  to  reduce 
the  general  indirect  expense  to  nothing. 

This  is  fallacious  on  its  face,  since  the  remaining  active 
machinery  must  incur  some  general  indirect  expense. 
The  possibility  of  eradicating  general  indirect  expense  is 
due  to  the  inexact  distribution  and  makes  it  practically 
valueless  to  the  manufacturer. 

This  plan  takes  no  account  of  idle  machinery,  dull 
times  or  machines  which  run  only  part  of  the  time,  and 
is  therefore  practicable  only  in  very  special  cases  where  all 
machines  are  busy  nearly  all  the  time,  and  turn  out  a 
more  or  less  uniform  product. 

The  differences  are  accentuated  because  the  rate  is 
based  on  the  assumption  that  the  plant  will  run  full  time 

84 


COST    KEEPING    SHORT    CUTS 

instead  of  taking  an  average  rate  which  indicates  more  Distribu- 
nearly  the  true  conditions  in  a  factory.  Burden 

The  New  Pay  Rate  Plan  obtains  the  indirect  expenses 
for  each  department  separately,  the  general  operating 
expense  being  first  allocated  to  each  department  on  the 
basis  of  direct  labor  costs  before  the  percentage  of 
departmental  indirect  expense  is  determined. 

The  departmental  indirect  expenses  are  not  charged  as 
percentages  to  the  articles  turned  out  by  these  depart- 
ments but  are  added  as  separate  rates  to  the  wages  of 
employes  working  in  the  departments,  the  amount  to  be 
added  being  based  on  the  time  the  employe  works  on 
any  one  job. 

This  plan  being  applied  departmentally  does  away 
with  one  of  the  chief  disadvantages  of  an  average  rate 
plan,  but  it  is  applicable  only  where  uniform  wages  obtain. 

It  is  simple  in  that  the  calculations  involve  only  the  It  is 
multiplication  of  the  time  an  article  is  in  process  by  the    ^™^  ^ 
rate  per  unit  of  time,  rather  than  a  pro  rata  of  indirect 
expense  added  to  the  products  turned  out  by  each  depart- 
ment.    Thus  the  plan  has  the  advantage  of  saving  con- 
siderable time,  especially  in  a  large  plant. 

It  likewise  has  disadvantages,  even  if  it  gives  true  cost, 
because  it  permits  of  no  analysis  of  costs.  All  the  figures 
are  obtained  in  totals,  thus  depriving  the  cost  department 
of  a  means  to  examine  the  cost  of  separate  items  and  to 
suggest  improvement  in  operations  that  will  reduce  cost. 
.  Detailed  information  is  exceedingly  valuable  to  the 
manufacturer  in  order  to  point  out  leaks  and  weak  spots. 
This  plan  fails  to  give  it  and  for  this  reason  frustrates  one 
of  the  prime  objects  of  an  adequate  cost  system. 

If  the  management  doesn't  particularly  want  an 
analysis  of  costs,  this  plan  can  be  used  advantageously 
providing  conditions  at  the  plant  in  question  render  it 
adaptable. 

85 


CHAPTER  XV 

Some  Forms  Used  in  Cost  Systems 

THE  following  pages  are  devoted  to  the  description 
of  typical  forms  used  in  connection  with  cost 
systems  now  in  daily  use  in  different  parts  of  the 
country. 

Since  the  variety  of  these  forms  is  legion,  we  only 
attempt  to  give  one  or  two  of  each  kind,  and  these  are 
given  only  for  the  purpose  of  presenting  to  the  layman  a 
general  idea  of  their  purpose  and  make  up. 

It  is  impossible  to  outline  a  cut  and  dried  system 
which  can  be  committed  to  print  and  safely  used  by  any- 
one who  desires  to  install  a  cost  system.  All  that  such  a 
book  as  this  can  hope  to  do,  is  to  outline  important 
principles  and  give  a  few  practical  interpretations. 

The  conditions  in  different  plants  are  so  varied  that 
the  successful  installation  of  a  cost  system  requires  special 
study  by  an  expert,  who  has  a  comprehensive  knowledge 
of  costs  and  whose  experience  enables  him  to  draw  up 
forms  suitable  to  the  case  in  hand. 

This  remark  may  lead  some  men  to  doubt  the  business 
expediency  of  a  system  that  requires  considerable  initial 
expense  to  set  into  operation,  and  much  patience  there- 
after until  it  gets  under  way;  but  in  reality,  as  testified 
by  the  experience  of  others,  it  is  a  matter  of  necessity, 
not  expediency. 

Therefore,  in  studying  the  forms,  don't  conclude  be- 
cause there  happens  to  be  an  item  left  off  that  you  think 
you  need,  or  a  couple  of  items  added  that  you  do  not 
need,  that  there  is  no  cost  form  in  that  particular  depart- 
ment that  can  meet  your  requirements. 

When  you  decide  to  set  a  system  going  in  your  plant, 
call  in  an  expert  cost  man  and  with  his  assistance  learn 

86 


COST    KEEPING    SHORT    CUTS 

in  general  what  forms  and  data  are  necessary  to  operate  Some 
it  effectively  and  you  can  then  draw  up  forms  that  will    ^^^^ 
suit  your  needs  exactly. 

A  manufacturer  who  attempts  to  design  his  own  forms 
unaided,  will,  nine  cases  out  of  ten,  overlook  some  account- 
ing detail  that  later  will  develop  into  one  of  great  impor- 
tance. This  will  necessitate  a  change  in  form  or  method 
of  collecting  the  data,  the  cost  of  which  will  be  as  much 
perhaps  as  the  service  of  an  expert  would  have  been  in  the 
beginning. 

Every  time  a  certain  kind  of  information  is  gathered 
together  it  can,  in  all  probability,  be  utilized  in  some  other 
way  to  advantage,  aside  from  the  purpose  for  which  it 
was  originally  collected.  Every  department  of  a  cost 
system  is  inter-related  with  some  other  department.  A 
cost  accountant  appreciates  this  fact  and  therefore  can 
draw  up  forms  for  one  branch  of  the  accounting  that  will 
be  sufficient  to  embrace  any  information  collected  in  this 
branch  and  useful  in  a  related  branch.  Hence  the  neces- 
sity for  an  experienced  man. 

A  Purchase  Requisition  (Figure  8)  is  a  memorandum  Purchase 
on  which  is  recorded  the  kind  and  quantity  of  a  certain  tio^"*^^' 
stock  that  is  to  be  ordered,  the  date  ordered,  the  order 
number,  and  similar  information  which  varies  in  detail 
according  to  the  plant  where  it  is  used. 

Its  purpose  is  to  facilitate  the  transaction  between  the 
purchasing  agent  and  the  factory  or  stock  room  in  regard 
to  the  purchase  of  material,  supplies,  etc. 

If  a  certain  department  needs  a  new  supply  of  material, 
which  has  been  exhausted  in  the  stock  room,  a  purchase 
requisition  is  filled  out  either  by  the  department  foreman 
or  stock  room  clerk  and  sent  to  the  purchasing  agent,  who 
orders  the  stock  and  files  it.  The  requisitions  can  be 
made  in  duplicate  or  triplicate,  as  occasion  demands. 

When  a  plant  employs  a  regular  stock  clerk  he  can 
make   out   all   requisitions   for   replenishment   of   stock 

87 


COST    KEEPING    SHORT    CUTS 


PURCHASE  ftEQU/S/TJON 


To. 


Fifr^Aasirr^    Acferrf 


Date 


Qu/jr/r/rr 


/f/zT/CL£:S 


D/ir^  ^/f/yr£D 


Fig.  8 
Purchase  Requisition 


m/ecmsE  oROEff, 

Hddresa                                                                                                                            ffeowsihon  /^o 
Place  Oi/r  Or</e/-M>,  /t'eftz/sif/orf  A/o  o/rc/  CafA^.  art  a// fnt/i>/ces 

SfZ/PO/^o-BfrO/FE 

DESCmRT/Ol^ 

^^/j//r/Tr 

r/?/cf: 

Fig.  9 
Purchase  Order 


COST    KEEPING    SHORT    CUTS 

because  he  keeps  a  record  of  each  kind  and  knows  when  Some 
the  low  mark  of  any  particular  stock  has  been  reached. 

In  special  cases  where  it  is  necessary  to  have  other 
parties  make  out  the  requisitions,  such  as  specification 
clerks  or  superintendents,  a  copy  should  be  sent  to  the 
stock  clerk  in  order  that  he  may  look  after  its  receipt, 
inspection  and  disposal  and  make  the  proper  entries  on 
his  records. 

A  Purchase  Order  (Figure  9)  contains  all  the  neces-  Purchase 
sary  details  of  a  bill  of  goods  purchased  by  a  factory, 
such  as  name  and  address  of  purchaser,  order  number, 
quantity  and  description  of  goods,  shipment  date,  price 
and  any  other  information  of  this  nature  that  is  deemed 
advisable. 

As  many  copies  can  be  made  as  desired,  according  to 
the  requirements  of  the  business.  There  should  always 
be  at  least  two  copies,  one  for  the  purchaser  to  retain  and 
one  to  be  sent  to  the  dealer  from  whom  the  goods  are 
purchased. 

If  it  is  desired  to  keep  a  record  of  **stock  ordered" 
according  to  kind,  a  copy  of  the  order  should  be  sent  to  ' 
the  stock  clerk  that  he  may  post  to  his  stock  record.     All 
records  of  incoming  material,  however,  should  be  kept 
separately  from  the  records  of  "stock  ordered.'* 

The  bookkeeper  can  also  use  a  copy  to  advantage  in 
checking  up  invoices,  thus  making  his  postings  more 
promptly  and  relieving  the  purchasing  agent  of  the  detail 
of  checking  the  invoices. 

A  Stock  Received  Report   (Figure  10)  embraces  all  Stock 
information  necessary  to  the  proper  recording  of  incoming  Rgpoj-t 
stock.     It  contains  such  items  as  number,  date  received, 
purchase  order  number,  quantity  and  description,  price, 
by  whom  received,  by  whom  shipped,  etc. 

This  record  is  usually  kept  in  a  book,  but  since  both 
the  bookkeeper  and  purchasing  agent  should  have  copies, 


COST 


K    E    E    P    I    N    G         S    H    0    R    T 


C    V    T    S 


Loose 
Sheets 


Some  the  disadvantages  of  this  system  are  obvious..    It  is  awk- 

^^^^  ward  to  pass  a  book  around  and  also  to  locate  the  different 

items  of  incoming  stock  that  have  been  recorded  in  it. 

The  advantage  of  loose  sheets  lies  in  the  fact  that 
every  department  concerned  with  the  receipt  of  stock  can 
be  supplied  with  a  copy. 

If  the  record  is  used  only  for  advising  the  bookkeeper 
and  purchasing  agent,  a  form  should  be  adopted  that  is  as 
simple  as  possible.  If  it  is  to  be  used  in  connection  with 
the  stock  record  it  must  necessarily  contain  information 
that  will  enable  both  the  purchasing  agent  and  the  stock- 
keeper  to  make  up  their  records  properly. 


SrOC/f  /fJECE/l/ED  /fEPOffT 


Qummr 


/}/?nCL£S 


rf^oM 


O/FUf/^Z/O 


Fig.  10 
Stock  Received  Report. 

Such  items  as  weight,  value,  classification,  bin  number, 
etc.,  are  generally  necessary  to  the  stockkeeper  in  order 
to  facilitate  posting  to  his  stock  records. 


C    0    S    T         K    E    K    P    I    N    G         S    II    O    R    T         ("UTS 

If  a  copy  also  goes  to  the  bookkeeper,  the  account,  Some 
department,  column,  folio,  etc.,  are  indicated. 

If  transportation  charges  are  heavy,  provision  should 
be  made  on  the  report  whereby  they  can  be  added  to  the 
purchase  price  of  the  goods,  thus  giving  the  exact  cost  of 
the  stock  as  delivered. 

One  of  the  chief  advantages  of  a  receiving  report  is 
that  it  makes  the  receiving  clerk  check  up  carefully  and 
inspect  the  stock  received. 

This  guards  the  management  against  faulty  stock  and 
paying  for  invoices  in  full  where  only  a  part  of  the  order 
has  been  received. 

In  this  way  leaks  are  stopped,  which  in  many  cases 
have  been  very  serious. 

A  Raw  Stock  Record  (Figure  11)  gives  all  the  neces- 
sary information  regarding  the  quantity  of  raw  stock  on 
hand.  There  is  one  card  for  each  kind  of  stock.  The 
typical  stock  record  card  contains  such  information  as 
classification  or  kind,  amount  received,  date  received, 
price  per  pound  or  piece,  amount  delivered,  balance,  high 
and  low  water  mark,  and  so  forth. 

The  card  serves  as  a  perpetual  inventory  of  every  kind 
of  stock,  the  amounts  received  being  added  to  the  old 
balance  and  the  amounts  delivered  being  deducted  each 
time  from  the  -  amount  on  hand,  and  a  new  balance 
extended. 

All  items  posted  to  such  records,  both  receipts  and 
deliveries,  should  be  taken  from  forms  made  out  by 
responsible  parties  and  checked,  otherwise  they  will  not 
reflect  the  true  status  of  the  stock  on  hand.  Another 
reason  why  extreme  care  should  be  taken  with  these 
records  is  that,  in  case  of  discrepancies  between  the  records 
and  actual  stock  on  hand,  they  cannot  be  accurately 
corrected.  Therefore,  separate  forms  should  be  used  for 
each  receipt  of  stock  and  for  each  requisition  that  comes 
from  the  factory.     Never  post  from  verbal  information. 


COST 


KEEPING 


SHORT 


CUTS 


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92 


COS    T         KEEPING         SHORT         CUTS 

The   cards   should   be   checked   periodically   by   the  Cards 
results  obtained  from  an  actual  inventory  and  in  case  of  pgj.j_ 
errors,  either  by  over-run  or  shrinkage,  the  cards  should  odically 
be  made  to  agree  with  the  actual  amount  of  stock  on  hand 
after  the  cause  for  the  discrepancy  has-been  determined. 

Unless  checks  are  made  and  the  reason  for  discrep- 
ancies is  ascertained,  the  records  cannot  be  relied  upon. 

As  much  care  should  be  taken  to  keep  the  stock 
records  in  balance  with  the  stock  on  hand  as  is  taken  by 
the  cashier  in  keeping  his  cash  book  in  balance  with  the 
cash  on  hand. 

A  Bill  of  Material  (Figure  12)  is  an  advice  to  the  Bill  of 
stockkeeper  that  the  items  shown  thereon  will  be  required 
for  a  certain  job.  It  is  sent  to  the  stockkeeper  as  soon 
as  the  job  is  begun  in  the  factory  and  he  issues  the 
material  as  needed,  the  foreman  signing  for  each  issue. 
The  foreman  also  makes  out  a  requisition  for  each  issue 
of  stock,  in  order  that  the  proper  entry  can  be  made  on 
the  stock  record  card. 

A  Material  Requisition  (Figure  13)  is  used  by  the  Material 
different  departments  of  a  plant  for  ordering  raw  material  ^i^^' 
from  the  stock  room  and  contains  information  which 
enables  the  stockkeeper  to  issue  the^  required  amount 
and  to  post  it  to  the  proper  record  card.  Ordinarily 
the  items  are  department  number,  date,  job  number, 
article,  quantity,  price,  by  whom  received  and  by  whom 
signed. 

The  foreman  of  a  department  or  his  clerk  usually 
makes  out  the  material  requisition  which  is  sent  to  the 
stock  room  and  then  to  the  cost  department.  In  this 
way  the  cost  of  the  material  can  be  charged  to  the  job 
and  the  proper  entry  can  also  be  made  on  the  stock 
record  card. 

Other  forms  of  material  requisitions  are  ruled  to 
accommodate  a  number  of  different  items  that  go  into  a 

93 


COST    KEEPING    SHORT    CUTS 


/?£QU/f?£0  BV 

BILL  -/Wr£">?//?Z.. 

DATE 
OEPY^O 

o/roE/fM? 

a/iss/r/c/ir/oy 

/j/?r/CLE 

Ci/^AT/rr" 

/f/?/-/f 

/fAfom^r 

ffECE/VEo  ay 

Fig.  12 
Bill  of  Material 


M/iTEmL  /TEQU/SmON. 

Orc^erAb  Depf /Yo 

^ymJbo/  Oafe  /Icc'f  A/o 


Qm/YT/n  /7£sc/F/rr/o/r 


v/jLOf: 


Oe/i\/ercc/    to 

De/iVsreal  hy 

foreman 

Fig.  13 
Material  Requisition 

94 


COST    KEEPING    SHORT    CUTS 

single  job.     These  are  used  when  it  is  not  desirable  to  Some 
issue  a  separate  ticket  for  each  kind  of  material,   the    ^^^^ 
whole  lot  being  ordered  at  one  time. 

There  are  a  multitude  of  forms  from  which  to  select. 
The  one  in  the  illustration,  Figure  13,  is  used  where  only 
one  kind  of  material  is  ordered  on  a  single  requisition. 

A  Production  Order  (Figure  14)  is  a  memorandum  Produc- 
issued  by  the  factory  manager  when  a  job  is  to  be  started,  Order 
and  gives  specifications  relating  to  it.  It  contains  such 
items  of  information  as  order  number,  date  wanted,  date 
completed,  description  of  product  to  be  manufactured, 
kind  of  material,  amount,  value,  etc.  This  serves  the 
factory  superintendent  as  a  written  statement  of  what 
he  is  to  manufacture  and  eliminates  verbal  orders. 

There  are  numerous  forms  of  production  orders  which 
are  generally  divided  into  two  classes  The  first  class  is 
used  when  it  is  desired  only  to  regulate  the  manufacture 
and  record  it,  and  the  second  class  where  it  is  necessary, 
in  addition  to  the  above,  to  send  information  regarding 
the  job  to  the  cost  department. 

In  the  first  class,  only  the  data  relating  to  the  manu- 
facture of  the  goods  is  necessary,  but  in  the  latter  such 
items  as  workmen's  time,  cost  of  operations,  quantity  of 
material  and  cost  should  be  recorded. 

When  an  order  necessitates  operations  that  must  be 
performed  by  different  departments  simultaneously,  sub- 
production  orders  are  issued  outlining  the  work  to  be 
d^e  by  the  respective  departments. 

A  copy  of  the  order  should  be  sent  to  the  stockkeeper 
so  that  he  can  properly  superintend  the  disbursement  of 
raw  material.  The  order  assures  him  of  the  correctness 
of  the  material  requisitions  that  are  sent  in  by  the 
different  departments  working  on  the  job. 

The  Time  Ticket  (Figure  15)  is  a  memorandum  that  Time 
shows  how  much  time  a  workman  has  spent  on  a  job, 
and  it  is  used  as  a  means  of  ascertaining  labor  cost  of  jobs, 

95 


COST         KEEPING         SHORT         CUTS 


Ospr 


DATE 


PnODUCT/ON    ORDER, 


//o 


0£SCRJPT/ON' 


qMNT/rr     FffJCE:       /RM0U7vT 


Daji/t/r£n  td 


/juTHOff/zoj  ay 


Fig.  14.     Production  Order 


T/ME  TICKET 


DEfflRTMENT 


WOKKMflNS    //jRM£ 


Z7/77Z-  Wbff/OffJA^   Mo. 


O/fOEff    No, 


Symbol 


BoxAb. 


M).  T^ECES. 


/iccou//r/Yo. 


Op£Rfir/o/\/ 


Time: 


FfflTE: 


/jMOl/fyT 


Hourly'  Mu^otreo  Oocl/tps    Qmt^ 


Remarks 


T/M£  ^r/7/rreo 


T/ME  F//V/SHED 


Eh  n  eMnt/^    O.  K, 


Fig.  15.    Time  Ticket 


COST    KEEPING    SHORT    CUTS 

preparing  comparative  records  by  workmen,  furnishing  Some 
data  for  adjusting  piece  rates,  distributing  labor  cost  by    ^^^^ 
account^,  departments  or  workmen,  checking  pay  rolls 
and  so  forth. 

pf  The  information  given  on  a  typical  time  ticket,  is, 
workman's  number  and  name,  date,  time  job  is  begun, 
time  job  is  finished,  pieces  finished,  operations  and  all 
other  information  required  by  the  conditions  under  which 
the  goods  are  manufactured. 

In  a  well  regulated  factory,  the  foreman  gives  a  time 
ticket  to  every  productive  workman  when  he  begins  a 
job  and  records  thereon  the  time  started.  This  is  done 
either  by  hand  or  by  a  time  stamp.  When  a  job  or  opera- 
tion is  finished,  the  foreman  records  the  time  finished  and 
starts  the  man  on  another  job,  issuing  a  new  ticket  with 
the  starting  time  for  the  second  job  or  operation.  Or  the 
time  of  starting  the  second  job  or  operation  may  be  noted 
on  the  old  ticket,  according  to  the  kind  of  ticket  used. 
The  time  ticket  may  be  issued  for  the  operation,  the  job, 
the  day  or  for  a  series  of  jobs  that  cover  several  days. 
On  this  account  a  great  variety  of  time  tickets  is  extant, 
but  the  object  of  them  all  is  practically  the  same,  viz.,  to 
indicate  how  much  time  each  man  is  employed  on  a  job  or 
operation  and  to  give  the  manager  a  line  on  his  efficiency. 

Since  time  tickets  embrace  information  that  is  related 
directly  to  cost,  the  kind  of  ticket  will  depend,  in  large 
measure,  upon  the  kind  of  cost  system  in  operation. 

In  some  factories  they  use  time  tickets  as  shown  in  A  Card 
the  illustration.  A  separate  ticket  is  used  for  each  opera- 
tion. These  are  adequate  for  the  day  rate  and  piece  rate 
systems  of  paying  men  and  give  the  cost  department 
information  whereby  the  cost  of  each  operation  can  be 
posted  on  comparative  records,  together  with  information 
that  indicates  the  efficiency  of  the  men.  This  feature  is 
brought  out  clearly  in  the  description  of  the  Cost  System 
given  in  Chapter  XIX. 

97 


COST 


KEEPING 


SHORT 


CUTS 


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COST         K    E    E    P    I    \    G         SHORT         CUTS 

A  Pay  Roll  (Figure  16)  is  a  record  showing  the  total  Some 
amount  of  time  worked  by  each  employe  and  the  amount    ^^™^ 
of  money  he  has  earned. 

Pay  Rolls  are  divided  into  two  general  classifications, 
one  of  which  contains  all  the  workmen's  time  and 
earnings  on  separate  sheets,  and  the  other  includes  this 
data  on  one  sheet. 

The  forms  used  in  the  first  class  give  such  information 
as  name,  date,  order,  operation,  article,  number  of  articles 
made,  time,  rate  and  amount.  One  individual  pay  roll 
serves  for  a  number  of  jobs. 

The  forms  used  in  the  second  class  contain  columns  for 
employes'  names,  time,  rate,  amount  and  so  forth.  The 
total  time  of  each  man  for  the  pay  period  is  recorded  in 
the  time  column  and  the  amounts  are  extended.  Some- 
times a  separate  column  is  used  for  the  daily  time  of  each 
man,  there  being  as  many  columns  as  there  are  days  in 
the  pay  period.  A  total  of  these  daily  amounts  at  the 
end  of  the  period  is  carried  into  the  total  time  column. 

A  Production  Report  (Figure  17)  gives  a  departmental  Frodiu- 
record  of  the  various  articles  made  during  a  certain  period  ||""  „.t 
of  time,  usually  a  week. 

The  typical  report  is  ruled  in  colunuis,  in  which  are 
recorded  the  order  number,  kind  of  article,  operation, 
number  made,  number  rejected,  etc.  If  the  report  is 
used  in  connection  with  figuring  costs  it  contains  columns 
for  time,  rate  of  pay,  material  cost  and  labor  cost.  Some 
forms  have  columns  giving  the  daily  record  of  production 
for  a  week  while  others  give  only  the  totals  for  a  week. 

In  brief,  this  report  is  used  for  the  purpose  of  laying 
before  the  management,  weekly,  the  amount  and  cost  of 
production  for  every  department.  It  can  also  be  used  in 
the  finished  stock  room  for  posting  to  the  finished  stock 
records. 

It  is  as  necessary  to  keep  a  record  of  the  finished  prod- 
uct or  parts  as  it  is  to  keep  a  record  of  raw  stock. 


COST 


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COST         KEEPING         S;HO    Jt^    ;  ;C^  P  -  T    S 

The  Finished  Stock  Record    (Figure   18)   gives  the  Finished 
article  or  part,  the  date,  the  classification,  high  and  low  R^orj 
water  mark,  the  amount  on  hand,  the  amount  disposed 
of,  and  the  balance. 

The  object  of  this  record  is  to  Morm  the  finished 
stock  keeper  at  all  times  as  to  the  quantity  of  each  kind 
of  stock  on  hand.  By  extending  the  balance  after  each 
issue  of  finished  parts  or  shipment  of  finished  product,  he 
can  tell  immediately  whether  or  not  it  has  reached  the 
low  water  mark.  If  the  supply  is  low  he  can  notify  the 
factory  manager,  who  in  turn  starts  an  order  for  a  new 
supply.  This  information  is  especially  valuable  where 
staple  parts  are  kept  in  stock  and  are  drawn  on  contin- 
uously for  erection  into  a  finished  product. 

The  information  regarding  receipts  of  finished  stock 
can  be  taken  from  the  production  reports  and  the  dis- 
bursements can  be  obtained  either  from  requisitions  or 
from  sales  sheets  or  shipping  orders. 

From  time  to  time,  as  the  stock  of  parts  runs  low,  a 
physical  inventory  should  be  taken  and  the  records 
adjusted  to  agree  with  the  stock  on  hand. 

A  Cost  Record   (Figure  19)   shows  the  cost  of  each  Cost 
part  or  article  manufactured  and  includes  the  direct  labor 
cost,  the  indirect  labor  cost,  the  cost  of  material,   the 
name  of  the  article  or  part,  the  operation,  the  quantity 
finished,  etc. 

This  information  is  arranged  in  column  form,  the 
items  of  cost  being  recorded  opposite  each  operation.  A 
footing  of  the  material  and  of  the  direct  and  indirect 
labor  cost  columns,  on  the  completion  of  the  last  opera- 
tion, gives  the  total  of  each  of  these  costs  for  the  com- 
pleted part  or  article.  A  recapitulation  of  these  totals 
gives  the  total  cost. 

Some  cost  records  are  ruled  to  show  comparative  costs 
and  defective  work,  also  the  selling  price  and  gross  profits. 

101 


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102 


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OFLfiATION 

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Fig.  20 


Cost  Record  of  Operations.     Reverse  side  of  Cost  Record  Card 
shown  in  Figure  19. 


COST 


K    E    E    P    I    N    G 


SHORT 


CUTS 


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COST         KEEPING         SHORT         CUTS 


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The  reverse  side  of  the  same  Cost  Record  Card  is  so  Some 
ruled  that  the  cost  by  x)perations  can  be  recorded.     This     ®™^ 
affords  good  data  for  comparative  purposes,  especially  as 
between  day  and  piece  workers  employed  on  the  same 
kind  of  work.     (See  Figure  20.)     Another  form  of  Cost 
Record  is  shown  in  Figure  21. 

There  is  perhaps  a  greater  diversity  of  forms  for  this 
record  than  for  any  other,  a  distinct  form  being  necessary 
for  practically  every  individual  plant. 

The  form  of  this  record,  as  well  as  that  of  other  records 
already  enumerated,  depends  entirely  upon  the  cost 
system  that  is  used.  It  is  because  of  this  inter-relation 
between  the  make  up  of  the  form  and  the  cost  system  that 
the  services  of  a  cost  expert  are  so  necessary. 

To  the  mind  that  has  never  made  a  study  of  costs  this 
statement  is  hard  to  understand,  but  it  is  nevertheless 
true.  A  satisfactory  cost  system  cannot  be  installed 
unless  it  has  behind  it  a  man  thoroughly  acquainted  with 
the  subject  and  all  of  its  ramifications. 

A  web  rotary  printing  press  is  a  complicated  piece  of 
machinery  to  the  lay  mind,  but  note  how  smoothly  it 
runs  and  the  beautiful  work  it  turns  out. 

Likewise  a  complete  cost  system  appears  a  hopeless 
mass  of  detail  to  the  uninitiated,  yet  when  set  in  motion  by 
the  man  who  knows,  it  becomes  a  great  satisfaction  and 
safeguard  to  the  management  of  a  plant. 

At  the  end  of  the  month  a  statement  should  be  prepared  Factory 
that  shows  the  Expenditures  of  the  Factory  by  accounts,  ^^^l^ 

The  illustrations  in  Figures  22  and  23  are  typical 
statements  of  this  kind. 

They  give  an  analysis  of  expenses  relative  to  factory 
operation,  including  amounts  expended  for  direct  and 
indirect  labor  and  material.  Forms  may  be  used  on 
which  the  expenditures  for  the  factory  can  be  summarized 
either  as  a  whole  or  by  departments. 

107 


COST 


KEEPING 


SHORT 


CUTS 


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COST    KEEPING    SHORT    CUTS 

The  cost  price  of  the  goods  sold  during  the  month.  Some 
the  inventory  at  the  beginning  and  end  of  the  month,    ^^^^ 
the  amount  of  finished  goods  on  hand,  amount  in  process 
and  so  forth,  can  also  be  recorded. 

The  statement  may  be  made  comparative  by  ruling 
columns  for  the  expenditures  during  the  corresponding 
months  of  the  previous  year. 

An  ordinary  ledger  may  be  used  for  keeping  these 
accounts,  but  a  regular  factory  ledger  as  described  later, 
is  better  adapted  to  the  purpose. 

The  tabulation  of  items  to  this  statement  is  nothing 
more  than  copy  work.  By  placing  the  statement  in  the 
adding  machine  carriage,  the  items  can  be  added  and  listed 
very  quickly.  The  advantage  of  using  a  machine  for  this 
kind  of  work  lies  in  the  fact  that  it  does  it  more  rapidly  than 
it  can  be  done  by  hand  and  the  totals  are  always  correct. 

A  Cost  Record  of  Sales  (Figure  24)  shows  an  abstract  Cost 
of  sales  made  during  the  month  and  a  classification  of  of^g^Ies 
the  different  articles  sold.      It  may  be  ruled  to  include 
cost  of  labor,  material  and  burden. 

Some  of  the  records  are  ruled  so  that  individual  sales 
can  be  posted  and  others  are  ruled  for  daily  totals. 

The  .adding  machine  is  very  useful  for  tabulating 
the  items  on  this  kind  of  sheet. 

An  Inventory  Record  is  a  record  that  shows  the  total 
amount  of  stock  on  hand  and  its  value. 

The  illustration  in  Figure  25  is  a  typical  inventory 
sheet  that  gives  the  quantity,  price  and  value  of  every 
kind  of  raw  stock,  semi-finished  material  and  finished 
product  on  hand  at  the  close  of  the  year. 

In  preparing  inventories,  care  should  be  taken  to 
include  goods  in  process. 

-  Where  the  inventory  is  used  in  connection  with  a 
stock  and  cost  system  it  should  be  divided  into  raw 
material,  goods  in  process  and  goods  finished. 

109 


COST 


K  p:  p:  p  I  N  G 


SHORT 


C    U    T    g 


Some 
P'orms 


The  amount  and  cost  of  raw  material  should  be 
entered  on  stock  cards  or  sheets  according  to  kind.  The 
posting  is  made  in  the  balance  column,  which,  if  the  stock 
cards  have  been  properly  kept,  will  agree  with  the  balance 
obtained  by  deducting  the  last  amount  of  raw  material 
issued. 


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Inventory  of  Raw  Stock 

The  goods  in  process,  their  cost  and  last  operation 
performed  upon  them,  should  be  entered  on  a  cost  sheet 
by  order  numbers. 

The  quantity  and  cost  of  goods  finished  should  be 
entered  on  the  finished  stock  record. 


no 


CHAPTER  XVI 

Final  Disposition  of  Cost  Figures 

UP  to  this  point  we  have  taken  into  consideration 
the  various  elements  that  constitute  cost  of  pro- 
duction, together  with  numerous  modifications 
that  arise  under  varying  conditions. 

First  we  explained  how  wages  are  paid,  then  how 
inventories  are  taken,  how  raw  stock  is  handled,  how 
burden  is  distributed  and  the  kinds  of  forms  used  in  keep- 
ing the  cost  records. 

This  naturally  leads  to  the  inquiry,  "What  is  done 
with  the  cost  figures  after  they  have  been  collected.'^" 

They  must  be  posted  either  as  debits  or  credits  to 
certain  accounts.  Therefore,  it  is  necessary  to  design  a 
System  of  Distribution  that  will  provide  accounts  to 
which  all  productive  and  non-productive  labor,  material, 
general  and  other  expenses  can  be  charged.  It  should  be 
arranged  so  that  charges  can  be  made  against  each  depart- 
ment and  also  against  any  shop  or  production  order,  so 
as  to  give  an  accurate  analysis  of  cost. 

All  material  requisitions  and  labor  tickets  pertaining 
to  a  production  order  should  bear  the  order  number,  and 
on  the  labor  tickets  the  department  number  should  also 
be  recorded.  If  the  order  is  for  plant  repairs  or  better- 
ment, both  requisitions  and  labor  tickets  should  bear  the 
number  of  the  department  for  which  the  repairs  are  made 
or  the  improvement  done.  By  thus  identifying  the  labor 
ticket  or  requisition  for  material  with  a  job  and  depart- 
ment, it  becomes  comparatively  easy  to  distribute  the 
cost  to  the  department  account  and  to  the   job. 

As  has  been  pointed  out  before;  it  is  absolutely 
necessary  to  draw  a  distinct  line  between  the  selling  and 
manufacturing    end   of  a  business.     The   cost   to   make 

ui 


COST    KEEPING    SHORT    CUTS 

Final  goods  is  one  thing,  the  cost  to  sell  is  quite  another,  and  if 
tT(fn  of  *^^^  ^^^^  ^^  borne  in  mind  from  the  outset  a  great  amount 

Cost  of  confusion  will  be  avoided, 
igures  rpj^^  following  "Card  of  Accounts"  is  typical  of  a  large 
manufacturing  business  and  is  so  arranged  that  all 
accounts,  including  selling,  manufacturing  and  general 
expense  items,  are  segregated  into  their  proper  groups.  A 
"card"  for  a  large  business  has  been  selected  because  it 
shows  what  is  necessary  for  accurate  accounting  in  big 
concerns  and  at  the  same  time  includes  all  of  the  fewer 
accounts  which  are  necessary  to  smaller  concerns.  For 
instance,  out  of  the  forty-one  general  accounts  shown,  a 
small  concern  could  select  possibly  fifteen  or  twenty 
which  would  answer  all  its  requirements. 

All  of  the  general  accounts,  shown  on  this  card,  that 
present  any  difficulty  in  understanding  are  described 
briefly,  so  that  a  little  study  of  them  should  give  the 
reader  a  very  clear  idea  of  what  each  one  is  intended 
to  include  and  how  it  is  used. 

CARD  OF  ACCOUNTS 

CAPITAL  ASSETS 

1-^Patent  Account 

2— Good  Will  Account. 

3 — Real  Estate  and  Building  Account. 

4 — Special  Tools  Account. 

5 — Plant  Machinery  and  Equipment  Account. 

This  includes  all  machinery,  shafting,  pulleys,  belts,  standard 
bench  tools,  boilers,  piping,  ventilators,  motors,  etc. 
6 — Patterns  and  Drawings  Account. 

This  includes  all  patterns,  drawings  and  blueprints  necessary  to 
the  manufacture  of  the  product. 
7 — Inventions  Account. 

This  includes  cost  of  experimental  work  and  development  of 
new  features. 
8 — Factory  Furniture  and  Fixtures  Account. 

This  includes  all  furniture,  fixtures  and  apparatus  necessary  to 
the  factory. 
9 — Office  Furniture  and  Fixtures  Account. 

This  includes  all  articles  of  this  nature  pertaining  to  the  general 
office  equipment. 

112 


COST         K    E    E    P    I    N    G         S    H    O    R    T         CUTS 


FACTORY  INVENTORIES  Final 

Disposi- 
10 — Raw  Material  and  Supplies  Account.  tion  of 

This  includes  raw  stock,  millwright  and  small  tool  stores,  pack-  ^P^^ 
ing  cases,  etc.,  which  may  be  treated  as  separate  accounts  where      ^ 
the  nature  of  the  business  demands  it. 
11 — Finished  Parts  Account. 

This  includes  all  finished  stock  and  accessories  which  can  be 
treated  as  separate  accounts  when  necessary. 
12 — Miscellaneous  Inventory  Account. 

This    includes    scrap,     inventory    adjustments,     dismantled 
machines,  etc.,  which  may  also  be  treated  as  separate  accounts. 
13 — Work  in  Process  Account. 

This  includes  all  parts  and  sections  of  a  product  that  are  in 
process  of  construction,   together  with  all  labor  and  material 
expended  on  them. 
14 — Experimental  Work  in  Process. 

This  account  includes  all  labor  and  material  expended  on  experi- 
mental work. 

FACTORY  OPERATING  ACCOUNTS 

15 — Operating  Expense  Accounts.     (Distributed  over  all  Burden.) 
These  accounts  consist  of  such  items  as  building  and  machinery 
expense,  electric  light,  power  and  heat,  a  separate  account  being  - 
kept  for  each. 
16 — Factory  Production  Expense  Accounts.     (Distributed  over  all 
Production  Department  Burden  Accounts.) 
These  accounts  cover  such  items  as  inspectors'  school,  nickel 
plating,  finished  stock,  stock  order  and  standard  departments. 
17 — General    Factory    Expense    Accounts.      (Distributed    over   all 
Burden  Accounts.) 
-  These  accounts  cover  factory  managers  and  foremen,  purchas- 
ing department,  janitors,  receiving  and  raw  stock  departments, 
time  and  cost  departments,  tool  supply  department,  printing  and 
stationery,  replacement  of  tools  and  machinery,  drayage  and  mis- 
cellaneous freight  and  express. 

Under  each  of  the  Factory  Operating  Accounts  are 
the  following  sub-accounts:  Salaries,  labor  supplies, 
repairs,  light,  heat,  gas,  furniture  and  fixtures,  insurance, 
taxes,  etc. 

113 


COST    KEEPING    SHORT    CUTS 


Final  FACTORY  BURDEN  ACCOUNTS. 

Disposi- 
tion of         18 — Repair  and  Construction  Burden  Accounts. 

Cost  These  accounts  cover  such  items  as  millwright  and  carpenter 

Figures  departments,  tool  designing,  inventions,  tool  and  pattern  making, 

experimental  work,  etc. 
19 — Manufacturing  Department  Expense  Accounts. 

These  accounts  cover  all  of  the  various  manufacturing  depart- 
ments, testing,  inspecting,  cleaning,  assembling,  polishing,  japan- 
ning or  painting  and  shipping  departments. 

Under  each  of  the  Manufacturing  Department  Ex- 
pense Accounts  are  sub-accounts  for  salaries,  non-pro- 
ductive labor,  supplies,  repairs,  light,  power,  gas,  heat, 
overtime  allowance,  etc. 

20 — Pay  Roll  Accrued  Account. 
21 — General  Ledger  Account. 

INVENTORIES  OF  FINISHED  PRODUCT. 

22 — Finished  Product  at  Factory  Account. 
23 — Finished  Product  with  Agents'  Account. 
24 — Models  Account. 

25 — Advertising  and  Stationery  Stores  Account. 
26 — Accessories  to  Product  Account. 

CURRENT  ASSETS  AND  LIABILITIES. 

27 — Accounts  Receivable  Accounts. 

These  accounts  cover  agents'  accounts,  miscellaneous  personal 
accounts,  reserve  for  doubtful  accounts,  accrued  interest,  etc. 
28 — Bills  Receivable  Accounts. 

These  accounts  cover  bills  receivable  and  reserve  for  doubtful 
notes. 
29 — Cash  Accounts. 

These  accounts  cover  cash  in  bank,  petty  cash,  postage  fund, 
paymaster's  fund,  etc. 
30 — Capital  Stock  Accounts. 

These  accounts  cover  capital  and  treasury  stock. 
31 — Accounts  Payable  Accounts. 

These    accounts  cover  such  items  as  audited  and  unaudited 
vouchers,  accrued  taxes,  bills  payable,  prospective  commissions, 
cash  on  unfilled  orders,  reserves  for  depreciation,  etc. 
32 — Surplus  Accounts. 

These  accounts  cover  profit  and  loss,  surplus  and  dividends. 


COST    KEEPING    SHORT    CUTS 


SALES  AND  COST  OF  SALES.  Final 

Diaposi- 
33 — Sales  Accounts.  tion  of 

These  accounts  cover  sales  of  the  product  and  accessories.  Cost 
together  with  cancellations  and  exchanges.  Figures 

34 — Cost  of  Sales  Accounts. 

These  accounts  cover  all  costs  for  selling  the  product  and  its 
accessories. 
35 — Other  Income  Accounts. 

These  accounts  cover  the  income  from  such  sources  as  rents, 
interest,  discounts  and  miscellaneous  inconje. 

SELLING  AND  DISTRIBUTING  EXPENSES. 

36 — Commission  Account. 

37 — Repairs  Account. 

38 — Allowance  Account, 

39 — Freight  and  Express  Account. 

40 — Other  Accounts. 

These  accounts  cover  all  expenses  incurred  for  general  sales 
department,  agencies,  advertising,  etc. 

There  are  sub-accounts  for  each  of  these  accounts,  such 
as  salaries,  supplies,  postage,  traveling  expenses,  tele- 
phone, telegraph,  taxes,  insurance,  rents,  conventions,  etc. 

GENERAL  AND  ADMINISTRATIVE  EXPENSES. 

41 — Administrative  and  General  OflSce  Accounts. 

These  accounts  cover  expenses  for  the  president,  general  mana- 
ger and  assistant,  together  with  expenses  for  the  various  admin- 
istrative departments. 

There  are  sub-accounts  for  each  of  these,  covering 
officers'  salaries,  office  salaries,  supplies,  postage,  heat, 
light,  power,  taxes,  insurance,  depreciation,  repairs,  trav- 
eling expenses,  donations,  janitors,  etc. 

Where  sub-accounts  are  used  it  is  customary  to  number 
them  from  "1"  upwards  and  to  designate  them  by 
writing  the  general  account  number  followed  by  a  dash 
and  the  sub-account  number.  Thus,  referring  to  the 
"Card  of  Accounts"  at  the  division  headed  "Factory 
Burden  Accounts,"  the  salaries  paid  in  the  manufacturing 

115 


COST 


KEEPING 


SHORT    CUTS 


DAPimL 

. 

SELLING 

AND 

GENL.  EKP. 

INCOmE 

AND 

REVENUE 

1 

CAPITPiL 
L/AB/L/T/ES 

\ 

\ 

1 

/ACCOUNTS 
REC'BLE 

\\    \   ■     /    / 

1, 

ACCOUNTS. 
PAY'BLE 

\\\      /  / 

/ 

BILLS 
REC'BLE 

/ 
/ 

BILLS 
PAY'BLE 

\\\    \         /    // 

/ 

0/^SH 

\\\\       /// 

/ 

SURPLUS 

\ 

'm/ 

/ 

1 

CMTROUNG    ACCOUNTS 

^ERAL    LEDGL 

1 
2 

CONTROUNG  ACCOUNT 

DR. 

i 

CR 

CRDR 
DR.  C/t 

CR 

\ 

DR 

mnrnRY 

Ca^TmiNG  ACCOUNT 

LEL 

^GER 



^^ 

^^^^ 

Raw  •STOCK 
SUPPLIES 

^"/7 

\^ 

SHIPPING 
EXPENSE 

/  / 

. 

FINISHED  PftRJS 
STOCK 

y    / 

PRODUCTION 

DEPARTMENT 

BURDEN 

\ 

WORK 
PROGRESS 

GENERAL 
EXPENSE 

\ 

F^PAIR'>^'CONSTR. 

DEPARTMENT 

BURDEN 

Fig.  26 
Diagram  of  Factory  Accounts. 
116 


COST    KEEPING    SHORT    CUTS 

department  would  be  designated  by  account  No.'*  19-1,"  Final 

the  "19"  referring  to  manufacturing  department  and  the  tiorfof ' 

"1"  referring  to  "salaries,"  which  is  the  first  of  the  sub-  Cost 

,  Figures 

accounts. 

Since  the  factory  department  of  a  manufacturing 
business  is  a  very  important  part  of  the  establishment, 
it  is  customary  to  segregate  all  items  pertaining  strictly  +^ 
the  factory  into  a  factory  ledger.  This  ledger  is  divided 
into  groups  of  accounts  adapted  to  the  line  of  business 
for  which  it  is  used. 

For  the  purpose  of  illustration,  the  following  outline 
of  a  typical  factory  ledger  is  shown.  By  careful  study  it 
will  be  seen  that  several  of  the  accounts  in  this  factory 
ledger  correspond  to  the  factory  accounts  mentioned  in 
the  general  "Card  of  Accounts."  All  other  accounts  for 
the  selling  and  administrative  end  of  the  business  are  kept 
in  the  general  ledger  or  ledgers. 

FACTORY  LEDGER  ACCOUNTS 

Group  l^Controlling  Account.     General  Ledger. 
Group  2 — Raw  Stock  and  Supplies  Account. 

a.  Raw  Stock  Stores.  c.  Packing  Cases. 

h.  Millwright  Stores.  d.  Small  Tool  Stores. 

Group  3 — Finished  Parts  and  Stock  Account 
Group  4 — Work  in  Process  Account 
Group  5 — :General  Expense  Account 

a.  Building  Expense.  e.  Heating. 

h.  Machinery  Expense.  /.  General  Tool  Expense. 

c.  Electric  Light  and  Power,  g.  General  Factory 

d.  Gas,  Fuel  and  Lighting.  Expense. 

Group  6 — Repairs  and  Construction  Department  Burden  Account 

a.  Machine  Shop.  d.  Pattern  Shop. 

h.  Tool  Making  Shop.  e.  Electric  Shop. 

c.  Carpenter  Shop. 
Group  7 — Production  Department  Burden  Account 

a.  MiUing  Machines.  e.  Assembling. 

h.  Screw  Machines.  /.  Erecting. 

c.  Punch  Presses.  g.  Inspecting. 

d.  Drill  Presses. 
Group  8 — Shipping  Expenses. 


COST         K    E    E    V    I    N    G         S    H    ()    11    T         C    V    T    S 

Final        The  factory  ledger  bears  the  same  relation  to  the 
tfon  of  general  ledger  as  the  various  subsidiary  ledgers  or  accounts 

Cost  bear  to  the  general  ledger. 
igur«'^^  A  general  scheme  of  this  relation  is  illustrated  by  the 
diagram  in  Figure  26,  in  which  the  factory  ledger  and 
subsidiary  accounts  are  represented  as  separate  books. 
It  is  not  necessary,  however,  to  have  separate  books, 
except  in  large  manufacturing  concerns  where  it  is  more 
convenient  to  do  so.  In  a  small  concern  the  various 
subsidiary  accounts,  including  the  factory  ledger  accounts, 
may  be  subdivisions  of  the  general  ledger,  although  it  is 
generally  desirable  to  have  a  separate  ledger  for  factory 
accounts. 

Beginning  with  the  Factory  Ledger  in  the  diagram  it 
will  be  seen  that  the  typical  accounts  comprising  this 
ledger  are.  Raw  Stock  and  Supplies,  Finished  Parts  and 
Stock,  Work  in  Process,  General  Expense,  Repair  and 
Construction  Department  Burden,  Production  Depart- 
ment Burden  and  Shipping  Expense. 

All  of  these  accounts  converge  into  a  Factory  Ledger 
Controlling  Account  to  which  their  total  debits  or  credits 
are  posted  and  which  forms  the  door  of  exit,  so  to  speak, 
from  the  Factory  Ledger.  The  corresponding  door  of 
entry  to  the  General  Ledger  is  a  similar  Controlling 
Account,  with  the  exception  that  the  debits  and  credits 
are  the  reverse  of  the  debits  and  credits  in  the  Factory 
Ledger  Controlling  Account. 

The  various  subsidiary  ledgers  for  the  general  accounts 
also  have  corresponding  controlling  accounts  in  the  gen- 
eral ledger  similar  to  the  one  illustrated  for  the  Factory 
Ledger.  In  this  way  the  total  debits  and  credits  for  all 
subsidiary  accounts  are  gathered  into  the  general  ledger. 
But  since  this  book  treats  principally  of  factory  costs,  our 
attention  will  be  devoted  to  the  Factory  Ledger. 

The  first  account  covers  raw  stock  and  supplies  used 
in   connection   with   the   factory   output   and   all    other 

118 


COS    T         K    K    K    P    I    N    G         SHORT         CUTS 

material  in  the  nature  of  factory  supplies.     This  account  Final 
is  debited  for  all  stock  and  supplies  received  into  the  tion^of^' 
factory  and  credited  for  all  that  is  used.     The  credits  are  Cost 
obtained  from  the  material  and  supply  requisitions.  igures 

The  account  for  finished  parts  and  stock  covers  finished 
manufactured  parts  and  all  stock  which  is  purchased  in 
finished  condition,  but  which  is  only  a  part  that  goes  into 
the  finished  product.  It  is  usually  known  as  semi-finished 
stock.  This  account  is  debited  with  all  receipts  and 
credited  with  all  disbursements  made  on  requisitions  for 
finished  parts  or  stock. 

The  Work  in  Process  account  covers  all  unfinished 
parts  or  products  in  the  factory,  being  debited  with  all 
labor,  burden  and  material  used,  and  credited  with  finished 
parts  or  products.  This  account  is  the  most  active  of 
the  factory  accounts  since  practically  all  the  material 
and  labor  expended  is  controlled  by  this  account. 

The  General  Expense  Account  covers  such  items  as 
are  shown  in  Group  5  of  the  Factory  Ledger  "Card  of 
Accounts,"  and  is  debited  with  all  general  expense  items 
and  credited  with  the  total  amount  that  is  distributed . 
between  the  Productive  Department  Burden  Account, 
Repair  and  Construction  Department  Burden  Account 
and  Shipping  Expense  Account. 

The  Repair  and  Construction  Department  Burden 
Account  covers  such  items  as  are  shown  in  Group  6,  and 
is  debited  with  indirect  labor,  supplies,  repairs,  general 
expense,  etc.,  and  credited  with  the  total  amount  dis- 
tributed to  Department  Burden  Accounts  on  the  basis  of 
productive  hours.  (This  basis  is  used,  of  course,  in  only 
those  factories  using  the  labor  hours'  method  of  Burden 
distribution.) 

The  Production  Department  Burden  Account  covers 
items  as  shown  in  Group  7,  and  is  debited  with  indirect 
labor,  supplies,  repairs  and  general  expense  and  credited 
with  the  total  amount  distributed  to  work  in  process. 

119 


COST    KEEPING    SHORT    CUTS 

Final        The  Shipping  Expense  Account  covers  all  items  inci- 
tion  of  dental  to  shipping,  and  is  debited  with  all  such  expenses, 
Cost  exclusive  of  freight  and  express,  and  credited  with  the 
igures  j-Q^-g^j  amount  that  is  distributed  to  the  cost  of  the  prod- 
uct shipped. 

While  the  above  explanation  of  a  factory  accounting 
system  is  more  or  less  in  skeleton  form,  it  gives  a  good 
general  idea  of  the  system  of  distributing  the  numerous 
debit  and  credit  items  and  show§  how  the  results  are 
finally  disposed  of. 

In  one  of  the  following  chapters,  in  which  the  routine 
and  statistical  phase  of  a  cost  system  is  treated,  are 
described  the  methods  for  handling  the  cost  data  with 
a  view  to  finding  out  the  exact  cost  of  each  unit  of  the 
product. 


120 


CHAPTER  XVII 

Cutting  the  Cost  of  Keeping  Costs 

"O^EE  that  roomful 'of  clerks,"  said  the  manufacturer 
^^  with  a  sweep  of  his  hand,  as  we  looked  over  the  cost 
^"^^  department  of  his  factory,  "that  costs  us  $15,000 
a  year." 

There's  the  rub — the  cost  of  running  a  cost  depart- 
ment is  a  constant  irritation  to  the  man  who  has  yet  to 
realize  that  it  costs  to  be  safe.  Yet  this  premium  which 
must  be  paid  to  be  safe — to  know  that  you  are  getting  the 
product  at  the  right  cost — is  nothing  but  the  insurance 
premium  in  another  guise. 

Pay  it  the  business  man  must — either  in  salaries  to 
cost  keepers  or  through  decreased  profits  on  sales.  But 
too  frequently  he  does  not  handle  his  cost  keeping  work 
with  that  concrete  sense  of  values  which  he  shows  in 
handling  the  making  and  selling  of  his  product. 

Whether  producing  figures  or  frying  pans,  the  prin- 
ciples are  the  same. 

A  cost  expert  of  national  reputation  for  his  successful 
handling  of  many  knotty  cost-of-production  problems, 
said  to  a  committee  of  the  stockholders  of  a  company 
in  trouble: 

"One  of  the  objections  raised  against  cost  systems 
is  that  after  incurring  considerable  expense  incident  to 
the  inauguration  of  such  a  system,  some  manufacturers 
have  discontinued  the  use  of  the  system  after  a  com- 
paratively short  period.  There  can  be  but  two  explana- 
tions given  in  such  a  case.  The  first  one  is,  that  the 
management  did  not  comprehend  the  system  and  its 
underlying  principles.  The  second  reason  is,  that  the 
system  was  defective  in  design,  and  the  underlying  prin- 
ciples were  either  not  basic,  or  else  wrongly  applied. 
Defects  of  this  character  in  a  system  usually  ifivolve  such 

121 


COST         K    E    R    P    I    N    G         S    II    0    R    T         CUTS 

Cutting  an  amount  of  clerical  labor  as  to  make  the  system,  to  a 
Costs  gJ'^^t  extent,  impracticable.  They  are  traceable  to  two 
principal  causes,  one  of  which  is  that  the  one  designing 
the  system  attempts  to  figure  out  a  plan  of  cost  finding 
from  a  bookkeeping  standpoint,  without  any  reference 
to,  or  knowledge  of,  factory  conditions  governing  the 
manufacture  of  the  product.  The  other  cause  is  due  to 
the  fact  that  those  in  the  immediate  charge  of  the  enter- 
prise are  unfamiliar  with  accounting  and  the  preparation 
of  statistics,  and  are  unable  for  this  reason  to  see  at  the 
outset  the  impractical  features  contained  in  the  system. 
In  other  intances  a  half-hearted  effort  is  made  to  in- 
augurate a  system,  and  the  slightest  resistance  eliminates 
the  desire  of  the  manufacturer  to  continue  his  plans  along 
these  lines,  merely  because  a  few  difficulties  are  encoun- 
tered during  the  first  few  days  or  weeks.*' 

There  is  no  doubt  but  that  the  cost  of  conducting  a 
cost  system  is  important. 
Common  But  let  US  apply  the  same  common  sense  we  use  in 
solving  the  problem  of  gaining  efficiency  in  a  factory,  to 
the  lowering  of  the  cost  of  handling  the  statistics  and 
facts  in  an  office. 

Let  us  use  machines  for  the  work  that  machines  can 
do  more  quickly  and  accurately  than  men. 

A  great  economist  has  said  that  "a  man  should  not 
be  kept  at  any  work  a  machine  can  do  better." 

Acting  on  that  dictum  has  made  the  commercial 
world  over  again  in  an  hundred  years. 

We  have  come  to  accept  it  everywhere  but  in  our 
offices.  There  we  still  keep  production  down  to  a  hand- 
work basis.  We  take  men  out  of  the  factory  by  adding 
automatic  machinery,  and  we  add  new  men  to  the  office 
force  to  take  care  of  the  increased  work  and  output. 

We  see  signs  of  a  change. 

It  has  been  slow. 

122 


C    ()    S    T         K     K    E    P    I     X    G         S    II    ()    R    T         ('     V    T    S 

When  business  men  realize  what  the  Burroughs  means  Cutting 
to  all  the  figure-handling  work  of  a  business,  the  machines  Qq^^^ 
will  become  as  common  as  typewriters. 

It  is  just  plain  everyday  common  sense  that  it  should 
be  so. 

In  any  cost  department  where  figures  have  to  be 
handled,  this  labor-saving  machine  should  be  introduced. 
The  cost  department  must  employ  a  number  of  clerks  for 
the  purpose  of  handling  the  figures,  statements  and 
statistics.  These  statistics  are  made  up  from  figures 
gleaned  from  many  sources.  These  figures  must  be 
recapped  by  special  headings  and  then  statistical  sum- 
maries made  from  these  recaps. 

There  are  two  chances  of  error  in  every  handling  of 
figures : 

First — In  putting  down  the  figure. 

Second — In  making  additions,  multiplications,  sub- 
tractions and  divisions. 

You  can't  afford  to  take  chances.  Where  the  fraction  Taking 
of  a  cent — in  such  a  business  as  a  foundry,  for  instance — 
may  be  the  difference  between  profit  and  loss,  work  must  • 
be  right.  The  manager  who  has  his  costs  checked  and 
counter-checked  for  possible  error,  is  really  making  the  very 
figures  by  which  he  gets  his  costs,  cost  him  from  twenty- 
five  to  sixty  per  cent  more  than  they  should.  It  doesn't 
matter  how  simple  and  eflficient  the  cost  system,  without 
a  Burroughs,  it  is  more  expensive  than  it  should  be. 

If  the  work  in  any  cost  department  were  figured  out 
on  a  piece-work  basis,  it  would  be  easy  to  find  out  just 
how  much  it  costs  to  handle  every  item. 

You  pay  the  clerks  on  a  basis  of  time — by  the  week  or 
month.  It  is  obvious  that  a  rapid,  accurate  man  can 
handle  a  greater  amount  of  work  to  a  satisfactory  con- 
clusion than  a  slow,  inaccurate  man.  It  is  right  here  that 
the  Burroughs  Adding  and  Listing  Machine  demonstrates 
its  utility  in  any  cost  department. 

123 


COST    KEEPING    SHORT    CUTS 

Cutting  The  regular  Burroughs  can  accurately  handle  160 
(^Q^g^g  items  a  minute.  There  is  probably  not  a  clerk  in  your 
employ  who  can  set  down  figures  and  accurately  add 
them  up  at  the  rate  of  40  a  minute.  Therefore  the 
machine  can  work  four  times  as  fast  as  your  most  expert 
clerk.  Remember,  the  Burroughs  prints  the  figures  and 
has  a  total  just  as  soon  as  the  figures  appear  on  the 
sheet. 

But  the  average  operator  in  an  office  cannot  handle 
the  machine  as  fast  as  it  will  operate.  Let  us  say,  for 
instance,  that  the  clerk  can  handle  a  machine  at  the  rate 
of  80  items  a  minute,  which  means  that  the  machine  and 
the  operator  are  twice  as  fast  as  the  fastest  clerk  without 
the  machine.  The  gain  in  time,  therefore,  in  handUng 
1,000  items — and  leaving  out  of  consideration  the  vital 
matter  of  accuracy — is  one  that  can  very  quickly  be 
reduced  to  a  dollars  and  cents  basis.  If  you  would 
check  the  items  your  clerks  handle  in  every  operation  for 
even  a  single  day,  you  would  realize  just  how  much  this 
machine  means. 

We  We  know  cost  departments  with  these  machines  where 
the  daily  increase  of  work  has  been  handled  through  a 
period  of  six  months  to  a  year  without  increase  in  the 
force.  In  other  places,  where  the  work  was  more  station- 
ary in  volume,  the  work  has  been  handled  more  quickly 
and  accurately  in  a  third  to  a  half  less  time. 

In  short,  the  Burroughs  means  a  gain  in  money -saving 
efficiency  in  every  line  of  work  that  the  cost  department 
handles,  just  as  an  automatic  machine  means  a  saving  in 
time  and  a  gain  in  efficiency  in  the  factory.  You  cannot 
afford  to  pay  men  to  handle  figures  that  a  machine  can 
handle  better,  because  it  can  handle  them  more  quickly, 
and  with  less  man  aid;  better,  because  it  is  absolutely 
accurate,  while  men  are  but  relatively  so;  better,  because  it 
furnishes  you  with  neatly  printed  sheets;  better,  because 

124 


K 


now 


COST    KEEPING    SHORT    CUTS 


it  is  cheaper;  better,  because  it  frees  your  best  men  from  Cutting 
drudgery,  and  lets  them  do  the  thinking,  planning,  doing  q^^^^ 
of  things  that  mean  bigger  results  to  the  business. 

Bear  these  facts  in  mind  when  considering  the  cost 
problem  in  your  business.  It  is  the  solution  of  how  to 
get  the  cost  facts  with  the  smallest  expenditure  of  time 
and  work. 


125 


CHAPTER  XVIII 

The  Burroughs  Machine  and  How  it 
Helps  the  Cost  Keeper 

BEFORE  entering  upon  a  description  of  the  actual 
operation  of  a  cost  system  it  is  well  to  describe 
briefly  the  machine  which  plays  such  an  important 
part  in  the  economical  handling  of  the  hundreds  of  items 
that  must  be  accounted  for. 

The  Burroughs  Adding  and  Listing  Machine  is  a  me- 
chanical device  which  adds,  lists  and  tabulates  numbers 
and  amounts  more  quickly  and  accurately  than  the  work 
can  be  done  by  hand  and  mind. 

It  is  something  like  a  typewriter,  only  a  little  heavier, 
more  compact  and  box  shape,  as  shown  by  the  illustration, 
and  it  is  operated  by  a  handle  at  the  side  or  by  a  touch 
bar  connected  with  an  electric  motor.     See  Figure  27. 

The  keys  on  top  are  arranged  in  columns  on  a  sloping 
keyboard.  The  mechanism  is  so  constructed  that  the 
depression  of  a  key,  which  stays  down  until  released, 
does  nothing  more  than  set  the  machine.  It  is  necessary 
to  pull  the  handle  or  touch  the  bar  before  the  item  thus 
"  set  up  "  can  be  listed  and  added.  The  advantage  of  this 
is  that  it  permits  the  operator  to  correct  a  wrong  item 
when  necessary  before  it  is  added  and  listed. 

When  an  item  is  set  up  incorrectly,  the  correction 
button  marked  "C"  restores  the  keys  to  normal  position, 
otherwise  the  handle  pull  restores  them  automatically 
after  the  item  has  been  added  and  listed. 

The  button  marked  "C"  (Figure  27)  is  a  general  cor- 
rection button  and  is  used  when  the  whole  item  is  to  be 
corrected.  The  row  of  buttons  at  the  top  are  individual 
column  correction  buttons  and  are  used  for  correcting 
an  error  in  one  or  more  figui'es  of  an  item. 

120 


COST 


KEEPING 


SHORT 


CUTS 


KEYBOARD  BUTTON 

VARIABLE    SPLIT 

DEVICE 


Fig.  27 

Keyboard  View  of  the  Burroughs  Duplex  Cost  Machine 
Electrically  Operated. 


Time 

Amount 

Dep '  t  18^/ 

8% 

2.3  5 

s% 

2.0  1 

1  2 

3.7  9 

6 

1.5  0 

1  6% 

4.7  7 

16% 

4.9  3 

1  0 

3.0  0 

7  S% 

2  2  .3  5  - 

Fig.  28 

Example  of  Cost  Machine  work  showing  how  Time  and 

Earnings  are  added  and  listed  simultaneously. 


127 


COST 


KEEPING 


SHORT 


CUTS 


Fig.  29 

Three-quarter  View  of  the  Burroughs  Cost  Machine 
Electrically  Operated. 


ADJUSTABLE 
STOPS 


LEVER  TO  PASTE 
CARRIAGE  BA(; 


CASE  SCREW 
STOP  ROD  HOLDER 


Fig.  30 

Rear  VieW  of  the  Burroughs  Machine  Showing  the  Carriage 
and  its  Principal  Features. 


1«8 


COST 


KEEPING 


SHORT 


CUTS 


The  button  marked  "E"  is  an  eliminating  button.  The 
When  it  is  depressed  in  connection  with  an  item,  the  item  jviLchin^  * 
can  be  listed  but  not  added  and  the  symbol  {'11')  printed 
at  the  side  of  it  will  indicate  this  fact.     This  button  is 
used  when  department  or  account  numbers  are  set  in  at 
the  top  of  a  list  of  items.     Figure  31  illustrates  this  feature. 


Dep' t 

16-//- 

>:^ 

1  2  .4  2  S 

2.2  4 

2.2  4 

2.5  4 

2.7  5 

2.4  5 

3.1  2 

3.2  2 

2.6  5 

1.9  7 

2.1  0 

1  2  .4  2  S 

2  5  .2  8  -''- 

Fig.  31 

The  button  marked  *'S.  T."  is  used  for  taking  sub- 
totals. When  it  is  depressed  and  the  handle  is  pulled, 
the  amount  which  had  been  accumulated  in  the  machine 
is  printed,  but  not  cleared  from  the  machine.  This  is 
shown  in  Figure  31,  the  sub-total  being  printed  at  the 
bottom  of  the  first  column  and  carried  forward  to  the  top 
of  the  second  column. 

The  button  marked  "Total"  is  used  for  getting  totals. 
When  it  is  depressed  and  the  handle  is  pulled,  the  total 
in  the  machine  is  transferred  to  the  paper  and  the  machine 
is  cleared. 

A  star  (*)  is  printed  opposite  all  totals  and  an  (s) 
opposite  all  sub-totals  in  order  to  distinguish  them  from 
other  items  and  from  each  other.  The  total  button 
should  always  be  depressed  and  the  handle  pulled  before 
an  addition  is  begun.     Thus  any  amount  that  may  be  in 

129 


COST    KEEPING    SHORT    CITS 


. 

SUMMARY  OF  PIECE  WORK  DAILY  TOTALS 

■ 

FOR  WEEK  ENDING  12-11.  1909  | 

DEPT 

FRIDAY 

SATURDAY 

MONDAY 

TUESDAY 

WEDNESDAY 

THURSDAY 

TOTAL 

, 

« 

« 

* 

» 

* 

.   * 

1 

6  6J2  4 

6  5.3  0 

5330 

61^3 

7  1.3  0 

6336 

3  8  1 .1  5  * 

s 

27.56 

2  2»0 

2  4.6  0 

2936 

30X30 

3130 

1  6  5.4  2* 

3 

6  3.4  5 

75O0 

6  2.4  0 

B4.C0 

8  33  0 

8  23  6 

4  7  0.91* 

4 

1  4  2.45 

13  2.4  5 

15530 

1  4  4 .0  6 

1  5335 

15  2>*5 

8  8  0.4  6* 

5 

1  5  4.6  7 

1  6  3.6  5 

1  3936 

1  5  0.3  0 

J  6  4.6  0 

1  5  5.7  8 

92736* 

6 

6  3.5  6 

5  53  7 

5  3.0  0 

6  1.3  5 

71X30 

6  23  6 

367X34* 

7 

5000 

4BA5 

49XD0 

5  9.7  9 

5  1.45 

5137 

3  10.2  6* 

e 

36.56 

3  0.0  0 

33XD0 

35X30 

4  1>40 

40.47 

216X3* 

9 

4  0.0  0 

4836 

41.46 

4  1.05 

52X30 

39X30 

26  2X37* 

.10 

2  5.6  0 

4  1.3  0 

2938 

2736 

31>J0 

31X38 

1 8632* 

.11 

4  3.5  0 

5  0.0  0 

4  1.9  9 

4  430 

4  4.60 

40X39 

2  6  4.6  8* 

.12 

15.45 

2  2.4  0 

17.45 

16A5 

17.3  5 

20X)0 

109J.0* 

.1  3 

2350 

1837 

3  1.46 

3  23  0 

3  2.4  0 

30X30 

1  68.43* 

.1  4 

36.50 

32X36 

2837 

3  7.45 

40O0 

4  1.08 

2  15.6  6* 

.15 

4  2.4  0 

4  0.0  0 

4  1.00 

4  0X30 

45X30 

4  2.6  0 

2  5  1.0  0* 

^6 

2  5.0  0 

2  3.0  5 

8  7.46 

28.46 

2  6.4  5 

3  7.0  6 

16  7.4  8* 

J.  7 

1  3336 

13036 

1  4  2.4  5 

1  2  5 .4  5 

1  2837 

15437 

8  15.16* 

.18 

4  2.4  5 

4  1.3  4 

3838 

51X33 

4137 

4.0X3  8 

255X35* 

.1  9 

7  3.4  5 

7  33  0 

6  3.8  9 

7  23  0 

7  2.3  4 

7  5.6  6 

431.14* 

.2  0 

2455 

82X50 

2  6.4  6 

2  6.3  5 

2  4.7  6 

31^0 

1 5  53  2* 

.2  1 

5  3.6  7 

4  33  6 

5  23  7 

5  2.3  0 

5  23  3 

48£8 

3  0  3.31* 

.2  2 

7  4.34 

7  2.3  0 

7  1.3  0 

7  0.0  0 

7  5.00 

7  7.7  7 

4  4  0.71* 

.2  3 

4  6.0  0 

4  2.4  5 

3  9.6  8 

5  0.0  0 

5-1X3  0 

5  23  3 

281X6* 

.2  4 

6  5.0  0 

6  2.4  5 

6  1.00 

5  23  7 

6  5.6  7 

6535 

3  7  0.24* 

.2  5 

1  5  2.3  0 

1  4  5.6  0 

1  4  5.0  0 

1  6  2.4  0 

1  6  33  6 

1  05X30 

873.86* 

.2  6 

12  3.5  0 

11130 

15  0.0  5 

1^030 

1  4  2.6  8 

15  330 

8  0  1.7  3* 

.2  7 

52A5 

4836 

3  2.0  0 

4936 

4837 

5  8.8  8 

2  9  1X3  2* 

.2  8 

4  7.6  6 

5  2.4  5 

3130 

4  2.4  5 

51X30 

6130 

2  8  63  6* 

.2  9 

15>J5 

2  2X)0 

1  230 

1  2.4  4 

2  23  0 

80X30 

1  0  4.8  9* 

JO 

3  23  6 

3  5.0  0 

2  2.6  6 

3'1X3  5 

4  130 

27X37 

18  9.6  4* 

.31 

5  3.4  5 

4  8.45 

4  2.0  0 

4  1.40 

5736 

3  7.6  7 

28033* 

.3  3 

3  63  6 

2136 

41J5 

4  0.0  0 

4  13  5 

4  2.6  6 

223X8* 

1,90439* 

1,841^4* 

180238* 

1,893X36* 

2,0  3  3.7  6* 

1,973^8* 

11.4  4  8.6  5* 

Fig.  32 

The  machine  carriage  permits  of  tabulations  similar  to  the  above.     This 

is  a  miniature  reproduction  of  actual  work.     Note 

its  neatness  and  uniformity. 


130 


COST    KEEPING    SHORT    CUTS 


Fig.  33 
No.  9  Burroughs 


Fig.  34 

No.  11  Burroughs 

ISl 


COST 


KEEPING 


SHORT 


CUTS 


ELIMINATING  KEY 


ISUB  TOTAL  KEV 


TOTAL  KEY 


Fig.  35 

,    Keyboard  View  of  the  Burroughs  Duplex 
Adding  and  Listing  Machine. 


f/flMES 

7^0/V. 

TU£S 

W£0. 

WUffS 

FRI 

s»r 

TOTALS. 

^9H.S-H.J^ 

300 

2.9  5 

30  0 

2.7  5 

3.0  0 

2.8  0 

17.5  0T 

'J:ATAou^ 

3.2  5 

3.0  0 

3.2  5 

2.8  5 

3.2  5 

2.8  0 

1  8 .4  OT 

1?  OTcCts^n^ 

2.9  5 

3.10 

310 

3.0  0 

3.10 

3.0  0 

18.2  5T 

f3'iir(r<^^ 

2.7  5 

3.2  0 

3.0  0 

3.10 

3.15 

3.0  0 

18.2  0T 

^^:H'aXci 

3.0  0 

3.2  5 

300 

2.9  5 

2.9  5 

3.10 

18.2  5T 

trn.TT^^mo 

3.0  0 

3.0  0 

3.2  0 

3.0  0 

2.8  0 

2.8  5 

1  7.8  5T 

/\  d^.'^AArU 

3.2  5 

3.0  0 

3.10 

3.0  0 

3.0  0 
Crand 

3.0  0 
Tofat. 

18.3  5T 
1  2  6.8  09 

Fig.  36 

Sample  of  Duplex  work  showing  how  the  machine  is  used  for  preparing 
a  weekly  pay  roll. 


1S2 


COST    KEEPING    SHORT    CUTS 

the  machine  will  be  thrown  out  and  not  be  added  in  with  The 
the  items  that  are  to  be  totaled.     If  there  is  no  amount  Machine  * 
in  the  machine  the  star  alone  will  be  printed.     The  star  is 
ySi  signal  to  the  operator  that  the  machine  is  "cleared  for 
action"  and  also  a  safeguard  for  the  accuracy  of  his  totals. 

The  illustration  in  Figure  30  shows  the  machine  car- 
riage, which  closely  resembles  a  typewriter  carriage.  The 
arrows  indicate  its  principal  features  and  the  tabulated 
sheet  in  Figure  32,  as  well  as  many  other  sheets  of  similar 
nature  that  are  reproduced  in  this  book,  show  the  kind  of 
work  that  it  can  do. 

The  illustrations  in  Figures  33  and  34  show  two  styles 
of  Burroughs  Machines,  namely,  the  nine-column  (No.  9) 
and  the  eleven-column  (No.  11).  These  machines  are 
illustrated  for  the  purpose  of  pointing  out  two  of  the 
styles  of  Burroughs  that  are  used  in  Cost  Departments. 

Another  style  is  the  No.  9  Duplex,  shown  in  Figure 
35,  together  with  a  sample  of  its  work.      (Figure  36.) 

To  all  appearances  it  is  the  same  as  the  regular  machine  The 
(the  illustration  closely  resembles  a  No.  9),  but  it  is  con-     "^  ^^ 
structed   with  two  sets  of  adding  wheels  so  that   the   • 
totals  of  any  number  of  groups  of  items  can  be  obtained 
and  also  the  grand  total  of  all  the  groups  at  one  operation. 

In  other  words,  a  total  pay  roll  for  each  department  of 
a  plant  can  be  secured  and  by  shifting  a  lever  and  pulling 
the  handle  again  a  grand  total  for  all  departments  can  be 
printed.  Or,  the  total  weekly  or  monthly  earnings  of 
each  workman  and  grand  total  for  all  workmen  can  be 
obtained  at  one  operation. 

The  fac-simile  illustration  in  Figure  36  shows  a  sample 
of  Duplex  work. 

It  is  impossible  to  outline  every  operation  in  a  cost 
system  where  an  adding  machine  can  be  used  to  advan- 
tage, but  we  can  give  suggestions  and  illustrations  where 
it  has  been  applied  in  our  own  and  other  cost  departments 
that  will  show  the  versatility  of  a  Burroughs. 

188 


COST 


KEEPING 


SHORT 


CUTS 


The  While  we  build  a  number  of  different  styles,  it  doesn't 
Machme  signify  that  each  style  is  cut  out  for  its  own  little  batch 
of  work  and  no  more.  The  difference  in  styles  consists 
principally  in  the  difference  in  sizes  ranging  from  6  column 
machines  to  17  column  machines,  and  embracing  special 
features  that  are  intended  to  handle  special  work. 

The  machine  we  ordinarily  advocate  for  a  cost  depart- 
ment is  the  Burroughs  Duplex  Cost  Machine  of  15  columns 
with  electric  drive,  1^3^  inch  carriage  and  arranged  to  add 
amounts  of  earnings  and  time  (either  in  hours  and  }/i 
fractions  or  in  hours  and  minutes),  at  one  operation. 

The  fraction  keys  constitute  the  special  feature  of  the 
cost  machine,  but  this  in  nowise  interferes  with  its 
adding  and  listing  ordinary  amounts,  or  its  capability  for 
tabulating  final  results  on  statement  sheets,  or  whatever 
report  forms  are  necessary. 

Take  for  instance  the  machine  shown  in  Figure  27, 
which  is  the  Duplex  cost  machine. 


18-//- 

3  7)/ 

1  2.6  5 

4  4)/ 

1  4.4  5 

5  4 

1  8.6  5 

3  5% 

1  1.4  4 

5  4 

1  8.0  0 

5  7 

2  1.3  5 

4  4)/ 

1  5.6  0 

3  2  7 

1  1  2  .1  4  - 

Fig.  37 


When  it  is  desired  to  add  workmen's  time  and  amount 
of  earnings,  from  the  labor  tickets,  by  workmen,  accounts, 
departments  or  other  classifications,   the  operator  first 


134 


COST         KEEPING 


SHORT 


CUTS 


.1       Burroughs 
^"^  Machine 


prints  the  reference  number,  using  the  ehminating  key  The 
to  prevent  it  from  adding.  He  sets  the  time  in 
left  hand  section  and  the  amount  in  the  right  hand 
section.  Then  by  touching  the  electric  contact  bar  both 
items  are  printed  on  the  paper  and  added.  The  second 
pair  of  items  is  taken  off  in  the  same  way,  and  so  on  until 
all  items  for  the  classification  have  been  added  and  listed. 
Then  by  depressing  the  total  button  and  touching  the  con- 
tact bar,  the  two  totals  are  printed 
as  shown  in  the  illustration.  Note 
the  department  number,  the  listed 
items  and  the  totals  in  Figure  37. 

Now,  suppose  he  wants  to  add 
some  requisitions  for  material  to 
find  the  cost  of  material  for  a  certain 
job.  He  uses  the  right  hand  section 
of  the  machine  and  runs  off  the 
amounts  as  shown  in  Figure  38. 

Again,  suppose  there  are  some 
extensions  to  be  made.  For  in- 
stance, 3425  pieces  at  $2.14  per 
hundred  and  1495  pieces  at  $4.12 
per  hundred.  These  extensions  in- 
*^'^^  volve  multiplication  which  can  be 

done  very  quickly  on  the  machine,  getting  an  absolute 
proof  of  the  work.  The  right  hand  section  is  used  for 
these  operations  and  the  calculations  come  from  the 
machine  as  shown  in  Figure  40.  By  pointing  off  the  result 
the  proper  number  of  places,  the  amount  in  dollars  and 
cents  is  obtained.  The  decimal  points  in  this  case  are 
represented  by  the  vertical  lines  which  are  put  in  by  hand. 
One  of  the  greatest  advantages  of  a  listing  machine  for 
such  work  as  this  lies  in  the  fact  that  every  step  of  the 
calculation  is  printed  on  the  paper.  When  the  operation 
has  been  completed  the  work  can  be  quickly  proved,  first 
by  inspecting  the  amounts  listed  (these  representing  the 


Job   6  3  3-/^ 

3.3  5 

4.5  5 

1  2.0  5 

2.3  6 

4.0  0 

2.5  5 

3.2  5 

1.4  5 

3  3  .5  6  ^ 

135 


COST 


KEEPING 


SHORT 


CUTS 


No. 


M. 


13.3  6 


Hours 

3  4             $/Sl.2  5 

DIME 
Savings    Bank 

Bank  Hours,  9  to  3. 
Saturdais,  9  to  12  and  6  to  8  p.  m. 

Capital,          -          -          -          -           .          $500,000 

Surplus  and  Undivided  Profits,            -           275,000 

Stockholders'  Additional  Liability,        -        500,000. 

Guarantee  Fund  for  Depositors,         $1,275,000 

Griswold  Street,  cor.  Fort  Street 
l^9i  'Woodwarii  Avenue 
n74    Jefferson     Avenue 
407     Gratiot       Avenue 

DETROIT,         --         MICH. 


Fig.  39 

Pay  envelope  showing  a  workman's  Number,  Time  and  Earnings 
recorded  with  the  Burroughs  Adding  Machine. 

186 


COST 


KEEPING 


SHORT 


CUTS 


3  4.2  5 

1  4.9  5 

3  4.2  5 

•       1  4  .9  5 

3  4.2  5 

1  4  9  .5  0 

3  4.2  5 

1,  4  9  5  .0  0 

3  4  2  .5  0 

1,  4  9  5  .0  0 

3,  4  2  5  .0  0 

1,  4  9  5  .0  0 

3,  4  2  5  .0  0 

•   1,  4  9  5  .0  0 

7,3 

2  9  .5  0  - 

6,1  5  9.4  0-^ 

The 

Burroughs 
Machine 


Fig.  40 


multiplicands),  and  then  counting  the  number  of  times  the 
amounts  have  been  repeated,  thus  checking  the  multipliers. 

A  very  little  practice  soon  makes  a  machine  operator 
quite  expert  in  multiplying,  and  when  once  he  has  mas- 
tered the  operation  he  will  never  give  it  up. 

If  it  is  desired  to  enter  the  amounts  of  pay  on  the 
envelopes,  the  machine  can  do  it  quickly.     See  Figure  39. 

The  operator  places  the  envelope  in  the  carriage  and 
turns  it  up  to  a  certain  point,  which  his  eye  soon  becomes 
accustomed  to,  thus  enabling  him  to  do  it  very  rapidly. 
Then  he  sets  the  workman's  number  in  the  left  hand  sec- 
tion (ignoring  the  fraction  column  altogether)  depresses 
the  eliminating  button  and  pulls  the  handle.  Then  he 
sets  the  time  in  the  left  hand  section  and  the  amount  in 
the  right  hand  section.  A  touch  of  the  bar  lists  both 
items  and  adds  only  the  amount. 

The  envelope  is  turned  out  and  another  inserted,  the  The 
number,  time  and  amount  being  set  down  on  it  in  the  same 
manner.  When  all  the  amounts  have  been  set  down,  the 
total  that  shows  on  the  adding  wheels. should  agree  with 
the  pay  roll  total.  If  it  does,  the  pay  roll  clerk  knows 
that  the  correct  amounts  have  been  printed  on  the 
envelopes  and  that  there  is  no  necessity  for  checking 


Envelope 


137 


COST    KEEPING    SHORT    CUTS 


Fig.  41 

Pay  Roll  prepared  with  a  Burroughs  Adding  Machine,  showing  master 

sheet  containing  the  names.     The  time  and  earnings 

are  added  and  listed  simultaneoulsy. 


138 


COST 


KEEPING 


SHORT 


CUTS 


them  back  to  be  sure  about  it.  If  the  total  by  depart-  The 
ments  is  desired,  each  total  can  be  noted  as  soon  as  the  Ma^chin^  ^ 
last  envelope  for  each  department  has  gone  through  the 
machine.  In  cases  like  this,  the  Duplex  Machine  enables 
the  operator  to  secure  the  total  for  each  department  and 
a  grand  total  for  all  departments  without  recapitulating 
the  department  totals. 

We  made  a  test  of  this  method  with  a  number  of 
envelopes,  and  found  that  the  amounts  could  be  written 
by  machine  and  the  total  checked  much  more  quickly 
than  it  was  possible  by  hand.  The  illustration,  Figure  39, 
shows  an  envelope  prepared  by  the  Cost  Machine. 

Then  the  pay  roll  clerk  may  want  to  prepare  a  pay 
roll  sheet  recording  workmen's  hours  and  amounts. 

He  inserts  the  pay  roll  sheet  in  the  12}^-inch  carriage, 
which  will  accommodate  sheets  up  to  that  width  and  runs 
off  the  time  and  amounts,  adding  the  amounts  only.  All 
that  is  necessary  is  to  set  the  number  in  the  left  hand  sec- 
tion and  the  amount  in  the  right  hand  section  and  touch 
the  bar.  The  machine  does  the  rest  as  shown  in  the  illus- 
tration. See  Figure 
41. 

Hours  and  amounts 
of  both  day  and  piece 
workers  can  be  added 
and  listed  at  the  same 
time  with  the  Duplex 
Machine,  securing 
totals  for  each  and  a 
grand  total  of  both. 
The  illustration, 
Figure  42,  shows  how 
this  work  is  done. 
The  items  opposite  the 
symbol  (?)  are  for 
Fig.  42  piece  workers  and  are 


■k 

* 

5  4  % 

1  2.3  6 

4  5/2 

1  5.0  0 

39 

1  3.0  0  1 

4  Q-^l^ 

1  7.5  5  • 

54 

1  8.0  0 

4  i  'A 

1  9 .4  5  1 

1   7  /2 

1  1 .4  0  i 

1  3  8  '/a 

6  1 .4  0  s 

1  5  3  % 

4  5.3  6  T 

2  9  2/4 

1  Q  6.7  6  * 

COST    KEEPING    SHORT    CUTS 

The  added  in  the  lower  counter,  while  the  other  items  are  for 
Machfne  ^^^  workers  and  are  added  in  the  upper  counter.  The 
first  total  opposite  the  "  s  »»  jg  for  piece  workers,  the  next 
total  opposite  "  t  *'  is  for  day  workers  and  the  last  total 
opposite  "  *  '*  is  the  combined  total  of  day  and  piece 
workers. 

When  the  cost  keeper  wishes  to  prepare  his  summary 
or  report  sheets  he  places  them  in  the  machine  and 
runs  off  column  after  column  of  figures,  just  the  same  as 
he  would  do  on  a  typewriter,  with  the  added  advantage 
that  he  can  print  a  total  of  each  column  as  soon  as  the 
last  item  has  been  listed.  See  Figure  32. 
A  These  are  a  few  of  the  many  things  that  one  Burroughs 
Only  ^^^^  Machine  will  do,  and  we  call  your  attention  to  them 
in  order  to  impress  upon  you  the  fact  that  it  is  an  all 
round  assistant  in  the  Cost  Department  and  not  a 
machine  whose  special  features  limit  its  capacity  for  work 
or  one  that  is  to  be  used  for  "  adding  "  only. 

Where  a  cost  department  is  large  and  can  use  several 
machines  more  economically  than  one,  we  usually  advo- 
cate that  some  of  them  be  cost  machines  and  some 
regulars.  Under  these  conditions  one,  two,  three  or  more 
clerks  are  often  delegated  to  the  task  of  getting  total  time 
and  earnings  of  workmen,  and  need  the  cost  machine  for 
this  special  class  of  work,  while  others  are  employed  in 
straight  adding  and  listing  of  material  requisitions,  or  in 
making  extensions,  which  can  be  done  on  regular  machines. 

However,  when  only  one  machine  is  to  be  used  in  a 
department  and  time  and  earnings  are  to  be  added  and 
listed,  pay  rolls  prepared,  extensions  made,  etc.,  the  Duplex 
Cost  Machine  should  be  installed  by  all  means,  because 
it  is  far  better  adapted  to  all  the  different  classes  of  work 
that  will  be  required  of  it. 


140 


CHAPTER  XIX 

Cost  System  in  the  Burroughs  Factory 

THE  Cost  System  in  the  Burroughs  Factory  will  be 
made  clearer  by  first  giving  a  general  idea  of  the 
route  raw  material  takes,  and  describing  the  two 
distinct  processes  necessary  to  complete  an  adding  ma- 
chine. 

The  first  process  consists  of  converting  the  raw 
material  into  finished  parts  which  are  ordered  in  lots 
ranging  from  several  hundred  to  several  thousand, 
according  to  the  quantity  we  have  found  advisable  to 
keep  on  hand. 

These  parts,  after  having  been  inspected,  are  turned 
into  the  Finished  Stock  Room. 

The  next  process  is  the  assembling  of  the  parts  into 
the  complete  machine.  Our  cost  records  take  into  con- 
sideration both  of  these  processes,  the  two  being  handled 
along  very  similar  lines. 

The  diagram  in  Figure  43  gives  a  good  idea  of  the 
route  that  raw  stock  takes  through  our  factory,  from  the 
time  it  is  received  in  the  Raw  Stock  Room  until  the 
completed  machine  is  received  in  the  Shipping  Room. 

All  orders  for  new  machines  or  parts  originate  in  the 
Superintendent's  oflSice. 

When  the  finished  stock  keeper  discovers  that  a  certain 
part  has  reached  the  low  water  mark,  the  Superintendent's 
oflBce  is  notified  and  the  Production  Order  for  new  parts 
is  issued,  the  order  being  sent  to  the  foreman  of  the 
department  that  is  to  perform  the  first  operation  upon  it. 
A  cost  record  card  is  sent  to  the  cost  keeper  notifying  him 
that  the  job  has  been  started. 

A  requisition  is  also  forwarded  from  the  Superinten- 
dent's oflSce  to  the  raw  stockkeeper,  notifying  him  that  a 
certain  amount  of  stock  will  be  withdrawn  by  the  foreman 

141 


COST 


KEEPING 


SHORT 


CUTS 


A 

Cost 

System 


for  that  job.  When  the  foreman  receives  the  material, 
one  or  more  of  his  men  perform  the  first  operation  upon 
it,  and  he  sends  in  their  time  tickets  to  the  Cost  Depart- 
ment and  passes  the  partly  finished  product  on  to  the 
next  department,  after  it  has  been  O.  K'd. 

Each  department  that  performs  an  operation  on  it 
sends  its  time  tickets  to  the  Cost  Department.  As  soon 
as  the  last  operating  department  has  finished  the  job,  the 
parts  are  sent  to  the  Finished  Stock  Room  and  the  Cost 
Department  is  notified  that  the  job  has  been  finished. 

The  Cost  Department  can  then  recapitulate  the 
labor  cost  of  the  job,  the  material  cost  and  figure  the 
burden,  getting  the  total  cost  of  the  job. 


Rm  STOCK 


/?  y^M  r  r  aJ       f<'G<juisJt/'on\for 


DEP'T.     '  Proc/ucUon    Order 

1  6/k/  Fbn  Card 


fi-oduc^ 


i"ig.  43 


Diagram  showing  route  of  material  from  raw  stock  room  to 
shipping  room. 


142 


COST    KEEPING    SHORT    CUTS 

When  it  is  desired  to  erect  a  number  of  machines  of  A 
a  certain  style,  the  Superintendent's  Office  issues  an  order  gystem 
to  the  Erecting  Department  and  sends  a  requisition  to  the 
Finished  Stock  Department  caUing  for  a  certain  number 
of  finished  parts,  which  are  sent  by  the  Finished  Stock 
Department  to  the  Erecting  Department.  A  copy  of 
the  factory  order  is  sent  to  the  Cost  Department,  notify- 
ing it  that  certain  machines  are  to  be  erected. 

The  time  tickets  of  the  Erecting  Department  are  sent 
to  the  Cost  Department,  where  the  total  labor  cost 
and  burden  for  assembling  the  parts  into  machines,  are 
calculated. 

Then  the  finished  machines  are  sent  to  the  Shipping  A 
Department,  where  they  are  ready  for  the  customer.  ^^^  ^^^^ 

The  above  outline  gives  a  good  bird's-eye  view  of  our 
factory  operation  and  makes  the  following  description 
of  the  system  more  easily  understood. 

What  we  accomplish  with  our  cost  system  can  be 
summed  up  under  eight  general  heads.     We  find  out: 

1 — The  labor  cost  of  each  job. 

2 — The  labor  cost  of  assembling  the  parts  into  machines. 

3 — The  labor  cost  of  each  workman. 

4 — The  labor  cost  of  each  operation. 

5 — The  cost  of  material  for  each  job. 

6 — The  total  amount  of  labor  cost,  burden  and  material  to  be 

charged  to  the  various  manufacturing  accounts. 
7 — The  total  cost  of  the  complete  machine. 
8 — The  relative  efficiency  of  day  and  piece  workers  on  the  same  job. 

Our  system  has  been  planned  so  that  it  not  only  gives 
the  cost  of  machines,  but  furnishes  a  means  of  keeping 
every  workman  under  close  observation  and  recording 
his  work  in  such  way  that  his  value  can  be  obtained  upon 
very  short  notice. 

By  studying  the  diagram  in  Figure  43,  it  will  be  seen 
that  a  great  number  of  time  tickets  pour  into  the  cost 
department  every  day.     This  is  due  to  the  fact  that  a 

143      ^ 


^COST    KEEPING    SHORT    CUTS 


BOX  NO.                             .                                        SYMBOL                                                                   LOT   NO. 

2672                                                  600   A— 9                           5 

«.«.o..,„.    Shaft   supportln(5:  611 'a 

1 

QUANTITY 

4020 

DESCRIPTION    OF    MATERIAL    Off    PARTS    USED. 

507  Gtm  Rod 

DO 
NOT 
WRITE 
IN 
THIS 
SPACe- 

HUklBCR  PARTS  WANTeO 

5000 

NUMBER  PER  BOX 

200 

ORDER  ISSUED  BY 

J.C.H. 

DATE    DUE 

4-15-.' 10 

NUMBER  OF  BOXES 

25 

"""' 

opertATiONS 

Piece 
marm 

o»rc 

OUAMIITV  PAKTS 

otLivmneo 

number 

f  man  s 
0    K 

SENT    AHEAO [ 

AN<r 

OATC 

Bo.  So. 

4 

32 

15 

15 

4 

36 

15 

15 

106 

3 

381 

2 

35     roueh 

2 

35   size 

and   oil 

15 

100 

3 

380 

, 

•..•.».  i33<i7i     Burroughs  Adding  Machine  Co.     Factory  Form  372                                                                                                      1 

Pig.  44 
A  Box  Card  accompanies  the  material  through  the  various  factory  operations 

144 


COST    KEEPING    SHORT    CUTS 

separate  ticket  is   made  out  for  each  operation.     The  A 
adding  machine  makes  it  possible  to  recapitulate  these  gystem 
with  a  minimum  expenditure  of  time  and  labor. 

It  would  be  useless  to  attempt  a  minute  description  of  How  it 
a  cost  system  in  the  few  pages  at  our  disposal,   so  in     ^^^^  ^^ 
outlining    the    Burroughs    System,    only    its    principal 
features  will  be  discussed. 

^In  our  business  the  product  in  process  of  manufac- 
ture can  be  handled  most  conveniently  in  metal  boxes. 
Each  batch  of  raw  material  or  work  in  process  is  carried 
from  department  to  department  in  galvanized  iron  boxes. 
Each  box  is  numbered  in  plain  white  figures. 

When  a  job  is  started,  a  box  card  (Figure  44)  i&  made 
out  in  duplicate  in  the  Superintendent's  office,  the  original 
going  with  the  box  of  material  to  the  Department  that 
is  to  first  work  upon  it,  and  thence  on  through  the  different 
operations  in  other  departments  until  it  is  finished.  It 
is  then  turned  over  to  the  cost  keeper  as  a  notification 
that  the  job  has  been  completed.  The  duplicate  copy 
remains  in  the  Superintendent's  office  as  a  tracer. 

On  each  box  card  is  recorded  the  box  number,  number 
of  boxes  required  for  the  batch  of  material,  symbol  or 
part  number,  quantity  of  material  used,  number  of  parts 
wanted,  number  of  parts  to  the  box,  date  due,  etc.  In  the 
left  hand  column  of  the  card  are  recorded  the  various 
operations  through  which  the  part  is  to  pass  and  the 
numbers  of  the  departments  that  will  perform  these  opera- 
tions. Figure  44  is  a  reduced  facsimile  of  a  box  card  made 
out  for  a  certain  shaft  in  the  machine. 

As  soon  as  the  foreman  receives  the  box  card  and  the 
material,  he  goes  ahead  with  the  operation,  completes 
it  and  fills  in  the  blank  spaces  opposite  his  department 
number,  indicating  the  number  of  parts  he  makes, 
number  spoiled,  date  the  job  is  passed  on,  etc. 

Then  he  sends  a  notification  ticket  in  duplicate  to 
the  Superintendent's  office.     The  number  of  parts  that 

146 


COST    KEEPING    SHORT    CUTS 


•-bVx' 176"^ '•"-••'              ORDER    FOR    STOCK 
2672                                        ^'''^^o  A..9 

LOT  NO. 

5 

DATE  OF  ORDER     g«p7»'*10 

^aAMP  OF  PARxShaft   supporting  611 '8 

STOREKEEPER  ;-                              . 

PLEASE  DELIVER  T04^^^E 
THE  FOLLOWING  MATERIAL. 

.DEPARTMENT 

QUANTITY 

OESCRI(»TION  OF  MATERIAL  OR  PARTS  USED 

4020 

507  Gun  Rod 

NUMBER  PARTS  WANTED 

5000 

NUMBER  PER   BOX 

200 

STOCK  ORDER 

J.C.H. 

PER 

DEPARTMENT 

DATE  DUE 

4-15- '10 

NUMBER  OF  BOXES 

25 

DELIVERED  BY. 

Fig.  45 
Stock  Order  Card,  made  at  same  time  with  box  card 


£672 


COST    RECORD 
^^^«^  A-.9 


LOT  NO. 

5 


DATE  OF  ORDER- 


2»7-'10 


NAME  OF  PAR 

STARTED  IN 


T    Shaft  supporting  611 ' s 

4 


.DEPARTMENT 


DESCRIPTION   OF    (MATERIAL   OR    PARTS   UStD 


4020 


507  Oon  Rod 


4BER    PARTS   WANTED 

5000 


NUMBER   PER   BOX 

200 


JMBER    PARTS    TRANS  r   D 

J.C.H, 


NO     PARTS   FINISHED 


DATE   DUE 

4-15- * 10 


MUMBER  OF  BOXES 


JUMBER  PARTS  DESTROYED 


DAT«   REC  O  FIN.   STOC^ 


25 


Fig.  46 
Cost  Record  Card,  made  in  skeleton  at  same  time  with  box  card 


146 


COST    KEEPING    SHORT    CUTS 

have  been  made,  the  number  rejected,  the  workman's  A 
number,  etc.,  are  taken  from  this  ticket  and  entered  on  gygtem 
the  Superintendent's  tracer,  which  is  the  dupUcate  of  the 
box  card. 

The  Superintendent's  clerk  then  refers  the  dupUcate 
ticket  to  the  foreman  of  the  next  department,  informing 
him  that  he  is  the  next  man  to  handle  the  material. 

When  the  foreman  of  this  department  is  ready  to 
handle  the  material,  he  sends  the  truckman,with  the  ticket, 
to  the  first  department  which  delivers  the  material  to 
him. 

As  soon  as  Department  2  completes  its  operation, 
another  notification  ticket  is  made  out  and  the  material 
is  passed  on  to  the  next  department. 

By  this  system  the  Superintendent's  office  is  notified 
of  the  completion  of  each  operation,  and  knows  at  all 
times  where  each  partly  finished  job  is  located  in  the 
factory  and  how  near  it  is  to  completion. 

In  addition  to  the  box  card  and  tracer  there  is  a  third 
copy,  made  out  at  the  same  time.  It  contains  only  the 
information  that  is  on  the  upper  half  of  the  card  and  serves" 
as  an  order  to  the  Raw  Stockkeeper.  This  stock  order 
is  shown  in  Figure  45  and  gives  the  stockkeeper  authority 
to  issue  stock  as  it  is  requisitioned  by  the  foreman  of  the 
department  that  is  to  perform  the  first  operation  upon  it. 

It  is,  of  course,  necessary  for  the  foreman  to  send  in  a 
separate, requisition  for  each  lot  of  material  that  he  uses. 

For  instance,  the  stock  order  may  call  for  150  pounds  of 
a  certain  kind  of  stock  and  the  foreman  may  send  in  requisi- 
tions for  only  25  pounds  at  a  time,  according  to  the  amount 
that  he  finds  convenient  to  handle  at  one  operation. 

On  the  reverse  side  of  this  card  are  columns  for  date, 
description,  quantity,  price  and  amount.  In  these 
columns  are  recorded  the  amounts  of  raw  stock  issued 
on  each  requisition  of  the  foreman. 

147 


COST    KEEPING    SHORT    CUTS 

A        When  the  last  amount  has  been  withdrawn,  the  total 
System  ^^  ^^^  items  on  the  reverse  side  should  equal  the  amount 
on  the  face  of  the  stock  order. 

If  it  happens  that  the  Superintendent's  clerk  over- 
estimates the  amount  of  stock  necessary  to  make  the 
parts,  a  credit  ticket  is  made  out  and  the  over  amount  is 
deducted  from  the  amount  indicated  on  the  face  of  the 
order.  This  over  amount  is  then  credited  back  to  the 
stock  record  card.  If  the  original  quantity  is  insufficient, 
smother  requisition  is  made  and  the  extra  amount  is  added 
to  the  original  amount  indicated  on  the  stock  order  and 
debited  on  the  stock  record  card. 

There  is  also  a  fourth  copy  which  contains  the  same 
information  as  the  stock  order  and  serves  as  a  Cost 
Record  Card,  Figure  46.  This  card  is  sent  to  the  Cost 
Department,  where  it  is  filed  in  a  cabinet;  it  notifies  the 
cost  keeper  that  a  new  job  has  been  started  in  the  factory. 
All  the  time  tickets  referring  to  this  job  are  filed  behind 
the  cost  record  card,  as  are  also  the  requisitions  for  the 
material  that  goes  into  the  job.  Upon  the  completion  of 
the  job,  the  time  tickets  and  requisitions  are  sorted  by 
departments  and  recapitulated  with  the  adding  machine, 
thus  securing  the  labor  and  material  costs.  The  burden 
for  each  department  is  then  figured  and  posted  in  its 
column  on  the  back  of  the  card.  Then  by  combining  the 
labor,  material  and  burden  totals  the  cost  to  manufacture 
that  particular  part  is  secured. 

Figure  46  shows  a  cost  record  card  and  Figure  47 
shows  the  reverse  side  where  the  total  labor,  burden  and 
material  costs  are  recorded. 

The  four  forms,  namely.  Box  Card,  Tracer,  Stock 
Order  and  Cost  Card  are  used  both  for  the  manufacture  of 
parts  and  also  for  the  assembling  of  parts  into  what  we 
call  dash  symbols,  which  are  machine  sections  composed 
of  two  or  more  parts  joined  together. 

148 


C    OST        KEEPING        SHORT        CUTS 

When  a  certain  style  of  Burroughs  Adding  Machine  A 
is  to  be  erected,  a  factory  order  is  made  out  in  triplicate,  System 
giving  specifications  for  that  particular  style  of  machine. 
One  of  the  copies  goes  to  the  Cost  Department,  where  it 
is  placed  on  file,  and  notifies  the  cost  keeper  that  a  certain 
style  of  machine  is  to  be  erected. 

Then  as  the  time  tickets,  Figure  48,  of  the  men  at  the 
erecting  benches  come  in  they  are  filed  behind  the  factory 
order,  together  with  the  requisitions  for  parts  and  sections 
that  go  into  the  machine. 

As  soon  as  the  machines  are  completed  the  cost  keeper 
is  notified.  Upon  receiving  the  notification  he  adds  up 
the  labor  tickets  and  the  material  requisitions  and  figures 
the  burden.  Then  on  the  back  of  his  copy  of  the  factory 
order  he  records  the  labor  cost,  material  cost  and  burden 
in  total  and  by  the  various  departments  that  have 
worked  on  the  erection  of  the  machines. 

Figures  49  and  50  show  the  face  and  reverse  of  our 
factory  order. 

The  data  is  then  transferred  to  a  permanent  card 
record  on  which  is  recorded  the  cost  per  machine  for  that 
particular  style  and  is  used  for  comparative  purposes 
when  other  machines  of  the  same  style  are  erected. 
This  is  a  very  valuable  record,  not  only  because  it  gives 
the  cost  to  manufacture  the  machine  (which  is  the  first 
object  of  the  cost  system),  but  because  the  cost  to  make 
machines  of  the  same  style  can  be  compared  from  time  to 
time,  giving  a  check  and  enabling  an  average  cost  to  be 
struck,  from  which  no  very  great  variation  should  occur. 

The  greatest  factor  in  making  it  possible  to  secure 
proper  data  is  the  use  of  the  individual  time  ticket  for 
every  job.  While  these  pour  into  the  Cost  Department  in 
large  numbers  they  are  quickly  disposed  of  by  using  the 
adding  machine,  which  recapitulates  them  by  departments, 
by  jobs,  etc.,  in  the  shortest  possible  time. 

149 


COST    KEEPING    SHORT    CUTS 


LABOR    & 

BURDEN     COST 

SYMBOL  a  LOT  NO 

DATE 

OEJ'T 

HOURS 

LABCiR 

BURDEN 

SUMMARY                                                         1 

DETAILS 

ITEM 

TOTAL 

LABOR 

BURDEN 

LESS  ITEMS  TRANSFO 
F    O. 

F.  O. 

F.  O 

F.  O. 

F,  O.  . 

MATERIAL 

UNIT  COST 

1 

Fig.  47 
Reverse  side  of  Cost  Record  Card,  showing  spaces  for  detailed  items  of  cost 


TIME  TICKET 

Department  No rJf... 

WORKMAN'S  Name                ^^ 

Date 

WORKMAN'S  No. 

^^.    ()tL^^<Le^ 

vl///// 

/S7r 

Order  No. 

Symbol 

Box  No.         ' 

No.  Pieces 

Account  No. 

^ 

CZ/^ 

7^^/ 

7S^o 

^/ 

Operation 

Time 

Rate 

Amount 

MOURLY 

HUHO.„ 

'^  / 

<r- 

Remarks 

Time  STARTED 

Time  Finished 

c>:3o 

FOREMAN'S  0.  K. 

/  ;o.. 

.^^o»    .,„..                                                      

%a^ 

BURROUOHS  AOOIMO.  MACHMI  CO.      FACTORV  rORH  HO.   ■» 

Fig.  48 
Each  workman  turns  in  a  time  ticket  on  completion  of  each  job  or  operation 

150 


COST 


KEEPING 


SHORT 


CUTS 


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152 


COST    KEEPING    SHORT    CUTS 

In  our  factory  a  separate  time  ticket  is  made  out  for  A 
each  operation,  one  man  turning  in  from  one  to  a  dozen  System 
tickets  a  day,  according  to  the  nature  of  his  work. 

The  foreman's  clerk  makes  out  a  ticket  for  each  work- 
man when  he  begins  a  job  and  checks  the  time  on  the 
tickets  at  the  completion  of  the  job.  The  various  jobs, 
operations,  departments,  etc.,  are  identified  by  numbers 
on  the  time  ticket. 

We  use  two  different  kinds  of  time  tickets,  one  for 
day  workers  and  one  for  piece  workers.  The  day  workers* 
ticket  is  shown  in  Figure  48.  The  piece  workers* 
ticket  is  similar,  but  is  yellow  instead  of  white  and  is 
made  out  in  duplicate,  the  original  having  a  carbonized 
back  to  save  using  carbon  paper.  These  tickets  are 
arranged  in  pads,  every  other  one  being  carbonized,  with 
a  duplicate  between  each  so  that  no  extra  time  is  re- 
quired in  filling  them  out.  The  reason  for  using  duplicate 
tickets  for  piece  workers  is  that  it  facihtates  the  checking 
of  the  pay  roll.  The  single  ticket  serves  for  day  workers 
as  will  be  shown  in  the  description  of  checking  the  pay 
roll  which  follows : 

Every  morning  the  time  tickets  for  the  previous  day 
are  sent  to  the  time  keeper,  who  sorts  them  by  depart- 
ments and  then  by  workmen.  The  first  thing  done  is 
the  checking  of  the  extensions  on  the  piece  workers* 
tickets.  The  day  workers'  tickets  are  checked  by  another 
process  which  is  described  in  detail  later  on. 

After  the  piece  work  ticket  extensions  have  been 
checked,  both  they  and  the  day  work  tickets  are  added 
and  listed  at  separate  operations  on  the  Duplex  Machine, 
which  secures  the  day*s  total  of  hours  worked  and  amount 
earned  by  each  workman  and  at  the  same  time  automat- 
ically recapitulates  these  totals,  giving  the  total  hours 
and  amounts  for  all  the  day  workers  and  all  the  piece 
workers  in  the  department. 

153 


COST 


KEEPING 


SHORT 


CUTS 


A  Since  there  are  9^  working  hours  in  a  day,  the  total 
System  ^^"^^  ^^  esich  workman,  as  shown  on  the  adding  machine 
slip,  should  be  9^  hours.  In  case  it  is  not  9^  hours  the 
time  keeper  knows  that  either  the  ticket  was  made  out 
wrong  or  that  the  workman  did  not  put  in  the  whole  day. 
Any  undertime  is  immediately  checked  by  comparing  it 
with  the  workman's  clock  card,  on  which  is  registered  his 
time  of  entry  into  the  factory. 


OAll.Y  PROOF  RF.PORT              TIfpt  No      //           n^rr              /  -  2.S~-    '/O 

ACCOUNT 
NUMBEK 

HOURS 

AMOUNT 

HOLRS 

^ 

29 

'U 

4 

7.0 

PRiCEDINC   DAYS  ALLOTMENT 

fQ32. 

'/4 

3o3 

»? 

lo 

32 

'U 

9 

34 

*DD      KEW  RMPLOYXS 

9 

% 

/ 

9S 

la 

12 

'/a. 

S 

23 

CHANCES  OF  RATEf 

IS 

425. 

'U 

f2S 

Ol 

TXJTAL 

lO^Z 

3oS 

o^ 

/6 

Joo 

'/z 

9Z 

OS 

DEDUCT:     EMPLOYES  QUIT 

f9 

h 

4 

oo 

17 

/97 

'4 

S3 

92 

^3 

29 

/v 

// 

7o 

PRESENT  ALLOTMENT 

lOZZ 

'h 

3o/ 

Oi^ 

ADD       OVERTIME  AND  ALLOWA^^ES 

10 

'/z 

2 

36 

PIECE  WORK 

TOTAL 

/03:^ 

3o3 

4o 

DtDKI        LATEs'i  ABSEHTFES 

6 

'k 

/ 

9S 

TOTAUS 

/OZ6 

Vz. 

3o/ 

^S 

PAY   ROLL 

/026 

/2 

3o/ 

V^ 

it7Si>t.l.'HjlH.aill'.i>^ : 1 

Fig.  51 
Daily  Proof  Report. 

This,  however,  does  not  show  why  the  workman  did 
not  work  all  day  and  for  this  purpose  we  use  a  "Daily 
Proof  Report"  and  a  Time  Keeper's  Daily  Report,  as 
shown  in  Figures  51  and  52. 

It  is  obvious  that  if  all  the  day  workers  in  a  depart- 
ment, whose  daily  earnings  for  full  time  are  known  to 
the  cent,  are  present,  that  the  total  amount  of  time  they 
will  put  in  and  the  amount  of  money  they  will  earn  can  be 
known.  These  items  of  time  and  earnings,  based  on  the 
assumption  that  all  the  men  work  the  full  day,  are  shown 
in  Figure  51,  opposite  "Preceding  Day's  Allotment." 

154 


COST 


KEEPING 


SHORT 


CUTS 


TIME-KEEPER'S  DAILY-  REPORT.   ^ 

Department  No /.? Date L..Z. ^..Z.. .f? 

LIST   AND  CLASSIFY  UNDER  PROPER  HEADING  ABSENT,    LATE,  PASS 
OUT    QUIT,  STARTED,  OVERTIME  &  ALLOWANCE.  AND  CHANGES  OF  RATE. 

NO. 

NAME 

HR'S 

AM'T 

NO. 

NAME 

HR'S 

AMT 

^T^iljLA^i 

^ 

^ 

^ 

f 

XZiZ^^X 

/a 

(^}a^KJL<^ 

f^ 

^/ 

^ 

/ 

r^ 

co-^^^<^ 

% 

<^ 

</ 

<^ 

(f(, 

i9^r<^ 

fl 

z 

<:><? 

iH 

^..uuJttjJ 

n 

2 

<7^> 

(OyfJ.^^ 

fe 

/p 

^ 

^/^ 

-^dLu/ttur 

^ 

/i^i 

of 

/ 

ao 

m 

^/h&^eju4^ 

e) 

9o 

lio 

UTLeer 

Z 

fk 

.^^^ 

^^ 

/r 

ILI 

LAJle^L^y^ 

(>'A 

/ 

t£ 

TIME-KEEPER 

FOREMAN 

208835                                                 Burrougha  Adding  Machine  Co.  Factory  Form  No.  377.        1 

Fig.  52 
Time  Keeper's  Daily  Report 

155 


COST         KEEPING        SHORT         C    UTS 

A  Now  in  case  any  of  the  day  workers  are  late,  or  absent, 
System  ^^  ^"^^>  ^^  ^^^  employes  come  in,  these  facts  are  noted  on 
the  time  keepers  Daily  Report  for  each  department. 
These  reports  are  made  out  by  the  time  keeper  from  the 
clock  cards  and  from  "discharge"  and  "new  employes" 
slips,  which  are  sent  in  each  day  by  the  foremen.  They 
are  then  O.  K'd  by  the  foremen  of  the  various  depart- 
ments. See  Figure  52.  This  report  refers  both  to  day 
workers  and  piece  workers  and  gives  the  reasons  for  any 
undertime  that  may  appear  on  the  adding  machine  slip 
previously  described.  Only  the  lates,  absentees,  quits, 
etc.,  for  day  workers  are  transferred  to  the  Daily  Proof 
Report.  On  the  report  in  Figure  52  is  shown  a  new 
employe  at  $1.95  per  day,  who  is  added  to  the  allotment. 
Next  come  two  employes  who  have  quit,  which  takes 
away  193^2  hours  and  $4.00  in  earnings.  The  next  item 
shows  10  hours  and  $2.36  to  be  added  for  overtime  and  the 
last  item  shows  6}^  hours  and  $1.95  to  be  deducted  for 
lates.  Compare  the  items  in  Figures  51  and  52.  After 
making  these  additions  and  deductions,  the  remaining 
10263^  hours  and  $301.45  is  allotted  for  the  current  day 
and  should  agree  with  the  grand  total  for  day  workers  on 
the  adding  machine  strip. 

If  the  department  is  one  having  both  day  and  piece 
workers,  the  total  hours  and  amounts  for  piece  workers 
are  entered  on  the  Proof  Report  in  a  space  alloted  for  that 
purpose  and  included  in  the  current  day's  allotment  of 
hours  and  amounts. 

This  system  not  only  checks  the  day  workers'  tickets, 
but  catches  errors  in  filling  out  these  tickets  and  prevents 
any  being  lost.  It  also  checks  the  pay  roll  for  day 
workers. 

The  piece  workers*  pay  roll  cannot  be  checked  until 
the  end  of  each  week,  when  the  pay  roll  is  made  up.  The 
time  put  in  by  piece  workers,  however,  is  checked  against 

156 


COST    KEEPING    SHORT    CUTS 


BURROUGHS  ADDING  MACHINE  CO. 

DETROIT,  MICH.  191- 


TO  THE  TIMEKEEPER: 

Mr    PAY    FOR     THE     WEEK    ENOINQ. 
SHOULD  BE  AS  FOLLOWS:^ 

DAY    WOKfC 


?/// .....,s,/.. 


PIECE    WORK. 


TOTAL. 


M,3J2.. 

*.«.« i^.. «.». .^<^^-!. ^^^^i^.. 

B.  A.  M.  Co.  Korm  45!  Mm-3  2»-IO  0.  M.  A  T.  Co   H'*^ 


Pig.  53.     Employe's  Claim  Ticket 


PIECE     WORK     RATE              . 

DATE      CTul.lJSio                  svM.No.          Q03y^D 

/ 

REMARKS: 

#/J" 

1 

DEPT. 
NO. 

OPER. 
NO. 

OPERATIONS 

Date 

PRICE 
PER    lOO 

DXTE 

PRICE 
PER   100 

/ 

/O/ 

5Uc£^ 

.08 

Fig.  54.     Piece  Work  Card 
167 


COST    KEEPING    SHORT    CUTS 


Burroughs 

>  Addi 

>ek  Endln 
ime 

ng  Machine  Co. 

„    DEC  15  1910 

No.          850  Nj 

Rate     ^2^         Hours     C^^ 

Amount 
) 

// 

Si 

(piece  work  amounts  shown  in  rc» 

Additions 

Total 

Deductions 

Net  Amount  Due 

w*      IN     OUT 

IN    OUT 

IN     OUT  ?oT.Is 

FBI 

6.27 

I2;28T~" 

SAT 

6:30 

IZJO!     ^ 

SUN 

1 

MON 

6;Z5 

12:25 

TUES 

6:30! 

12:29! 

WED 

6:29 

\l'\'^ 

THUR 

6:27 

f2:20 

Rece 

irad  PaymenL 

B.  A.  M. 

CO.  FACTORY  FORM  NO.  892       Q-  M.  *  T.  CO. 

Fig.  55 

Clock  Card 


158 


COST    KEEPING    SHORT    CUTS 

the  clock  cards  daily  and  any  undertime  or  overtime  is  A 
accounted  for  on  the  time  keeper's  Daily  Report.  System 

After  the  checking  has  been  completed,  which  by  the 
way  is  accomplished  in  very  short  time,  the  day  workers' 
tickets,  the  duplicates  of  the  piece  workers'  tickets  and  the 
Daily  Proof  Report  are  sent  to  the  Cost  Keeping  Depart- 
ment, where  they  are  used  in  figuring  the  cost  of  the  var- 
ious jobs  and  in  making  the  labor  distribution  to  accounts. 

The  time  keeper  then  files,  by  workmen's  numbers, 
the  original  copies  of  the  piece  workers'  tickets  in  an 
ordinary  cabinet  file  behind  guide  cards,  which  bear  the 
numbers  of  the  workmen.  They  remain  here  until  the  end 
of  the  week  when  the  pay  roll  is  made  up.  Then  they 
are  taken  out  and  added  on  the  machine,  getting  the 
total  time  and  earnings  for  each  man.  The  total  time 
for  each  man  is  then  checked  against  the  time  shown  on 
his  clock  card  and  the  total  earnings  are  checked  against 
his  claim  ticket,  which  is  turned  in  previous  to  making  up 
the  pay  roll,  and  shows  what  he  has  calculated  to  be  his 
earnings  for  the  week.     See  Figure  53. 

In  case  there  is  a  discrepancy  of  more  than  five  cents 
between  the  time  keeper's  total  and  the  workman's 
calculation,  the  time  keeper  refers  the  matter  to  the 
foreman  for  adjustment.  After  the  weekly  totals  for  the 
piece  workers  have  been  checked,  the  amount  is  entered 
on  the  clock  cards  from  which  the  pay  roll  is  prepared. 
The  total  earnings  for  day  workers  are  entered  on  the  day 
workers'  clock  cards  by  extending  the  total  number  of 
hours  worked  and  the  rate  per  hour. 

There  is  a  cabinet  containing  rate  cards,  similar  to 
that  in  Figure  54,  on  which  is  written  the  rate  per  hundred 
or  per  piece  for  every  part  manufactured.  These  are 
referred  to  from  time  to  time  for  checking  the  rates  entered 
on  the  piece  workers'  tickets,  it  having  been  found  un- 
necessary to  check  all  the  tickets  daily  in  this  way. 

U9 


COST    KEEPING    SHORT    CUTS 

A  The  Burroughs  Pay  Roll  Sheets  are  tabulated  on  a 
System  Duplex  Cost  Machine,  which  has  two  complete  sets  of 
adding  wheels  or  counters,  enabling  the  operator  to  record 
the  hours  and  amounts  of  earnings  for  both  day  workers 
and  piece  workers  and  at  the  same  time  to  accumulate  the 
total  hours  and  amounts  for  day  workers  and  piece 
workers,  together  with  a  grand  total  for  both.  This  is  all 
done  at  one  operation,  the  work  appearing  as  shown  in  the 
columns  on  the  left  hand  side  of  the  pay  roll  sheet  in 
Figure  56. 

In  order  that  this  work  may  be  done  in  one  operation, 
the  keyboard  of  the  Duplex  Cost  Machine  is  split  into 
three  sections,  one  of  which  records  the  rates  of  day 
workers,  another  adds  hours  and  fractions  of  hours  and 
the  other  the  amounts  earned.  This  is  done  by  setting 
up  in  the  hour  section  the  number  of  hours  put  in  by  a 
workman  and  in  the  amount  section  the  wages  earned  and 
pulling  the  handle,  both  items  printing  and  accumulating. 
In  case  a  rate  is  used  it  can  also  be  printed  at  the  same 
time  the  hours  and  amounts  are  printed  and  added. 

The  two  counters  comprising  the  Duplex  mechanism 
are  controlled  by  a  little  lever  located  at  the  left  hand  side 
of  the  keyboard.  By  means  of  this  equipment  the 
machine  can  add  and  list  the  hours  and  earnings  of  both 
day  and  piece  workers  and  secure  the  total  hours  and 
earnings  for  both  in  one  operation.  When  the  machine 
is  to  be  used  for  ordinary  adding  and  listing,  the  upper 
counter  is  thrown  into  operation  by  shifting  the  Duplex 
control  lever  into  the  upper  position.  When  necessary 
to  use  both  upper  and  lower  counters,  as  when  the  earn- 
ings for  day  and  piece  workers  are  added  and  listed  at  one 
operation,  the  upper  counter  items  are  entered  with  the 
control  lever  in  the  upper  position  and  the  lower  counter 
items  are  entered  with  the  control  lever  in  the  lower  posi- 
tion. The  lower  counter  items  are  distinguished  from  the 
former  by  the  little  dot  and  bar,  shown  in  the  illustration. 

160 


COST    KEEPING    SHORT    CUTS 

Furthermore,  it  is  possible  to  accumulate  items  in  the  A 
upper  counter  and  to  print  the  total  of  these  items  and  at  gystem 
the  same  time  clear  the  upper  counter  for  another  addition 
and  transfer  the  total  into  the  lower  counter.  This  is 
accomplished  by  setting  the  Duplex  control  lever  in  the 
upper  position  and  using  the  transfer  total  button  instead 
of  the  regular  total  button.  When  the  machine  is  work- 
ing this  way  the  lower  counter  acts  as  a  kind  of  reservoir 
for  the  totals  accumulated  in  the  upper  counter  and  thus 
automatically  recapitulates  a  grand  total  for  any  number 
of  totals  that  may  be  printed  with  the  upper  counter. 
The  grand  total  may  be  printed  at  any  time  by  shifting 
the  Duplex  control  lever  to  the  lower  position  and  then 
depressing  the  regular  total  button  and  pulling  the  handle. 
The  working  of  this  machine  as  applied  to  pay  rolls  will 
be  more  clearly  understood  by  following  the  method 
described  in  preparing  the  Burroughs  Pay  Roll. 

The  first  thing  the  operator  does  is  to  clear  both  upper 
and  lower  counters.  This  is  done  first  by  shifting  the 
Duplex  control  lever  into  the  lower  position,  pressing  the 
total  button  and  pulling  the  handle  and  then  repeating 
the  operation  with  the  control  lever  in  the  upper  position. 
This  gives  assurance  that  both  counters  are  cleared  for 
action. 

All  piece  workers'  time  and  earnings  are  then  added  in 
the  upper  counter  and  all  day  workers'  rates,  time  and 
earnings  are  added  in  the  lower  counter,  the  items  being 
taken  directly  from  the  clock  cards.     (Figure  55.) 

Upon  listing  the  last  item,  the  control  lever  is  shifted 
to  the  lower  position  and  a  sub-total  taken.  This  opera- 
tion prints  the  total  day  workers'  hours  and  earnings. 
Then  the  control  lever  is  moved  to  the  upper  position  and 
a  transfer  total  is  printed  which  prints  the  piece  workers' 
total  hours  and  amounts.  Since  the  printing  of  the  sub- 
total does  not  clear  it  from  the  lower  counter  and  since  the 
total  in  the  upper  counter  has  been  transferred  to  the 

161 


COST 


KEEPING 


SHORT 


CUTS 


BURROUGHS  ADDING  MACHINE  COMPANY 

SHEET  NO.                   1  » 

o 

OEPT 

8  »                                                                     PAY  ROLL  FOR  WEEK  ENDING 

I        ,19 

.    19.11* 

Pltct    «>.> 

DAV  »ORk 

A0OITlO^i. 

DtrxCTioss 

««V«KS 

LMCLOIti' 

""'dcT' 

lU. 

H— 

A— 

H.^ 

A— 

»-. 

A*.- 

! 

: 

i 

5  4 

18.5  8 

900 

1  8.5  8 

32 

2  4.00  : 

80  1 

24J30 

22 

53il 

94 

1  1.83: 
1  5.7  0 

802 
803 

I  1.83 
1  5.7  0 

3  4''i 

1  1.9  3 

y. 

5 

805 

1  1.88 

4  9  '/. 

17.5  8 

'    806 

17.5  8 

1  3.3  5 

807 

13.35 

2  0 

X  6.80  : 

• 

■^ 

608 

1  0.8  0 

22 

1X15  : 

1-9.0  8 

809 

810 

1.05 
19.0  8 

I  7.87 

k 

15 

8  1  1 

I  7.7  2 

4  8  i 

1  5.7  8 

812 

1  5.7  8 

5  Jk 

1  8.3  7 

813 

18.37 

2* 

1  2.9  6  : 

814 

1  2.96 

26 

34 

14,04  : 

17.2  1 

815 
8  16 

I  4.0  4 
17.21 

4  4  ■/. 

15.6  2 

817 

1  5.8  2 

13.54 

813 

I  3.5  4 

24 

I  2.9.6  : 

819 

18.9  6 

19J7 

820 

I  9,37 

1  8.69 

821 

1*8.69 

I  7.19 

822 

17J9. 

28 

I  5.3  Z: 

823 

15J2 

40 

2  1.60  : 
l"8.7  5 

324 

825 

2  1.60 
18.7  5 

1  6.6  9 

826 

1  6.8  9 

33 

17.8  2  = 
1  5.2  1 

828 

17.8  2 
1  5il 

30 

16.ZC: 

829 

1  6.2  0 

24 

1  2.9€  : 

830 

1  2.9  S 

29 

1  5.6  6  : 

831 

1  5.66 

16.9  3 

832 

16.9  8 

1  7  .3  6 

833 

1736 

6  7  3'<, 

1  8  7.0.0  5 

1 

20: 

5  2  2J0S5 

o 

10  0  9'* 

3  J  5.2  5  T 

168  3 

5  2  2.2  5  • 

Fig.  56 


162 


COST         KEEPING         SHORT         CTJTS 

lower  counter,  it  is  obvious  that  the  lower  counter  now  A 
contains  an  amount  equal  to  the  sum  of  both.     By  shift-  gygteu, 
ing  the  control  lever  into  the  lower  position  again  and 
taking  a  total  in  the  usual  way  the  grand  totals  of  day  and 
piece  workers'  "1683"  hours  and  "522.25'*  are  printed. 

The  cards  are  then  turned  through  again  and  the 
workmen's  numbers  and  net  amounts  entered  at  one 
operation,  only  the  amounts  totaling.  This  work  is  done 
on  the  upper  counter,  the  operation  being  identical  with 
that  of  a  regular  machine.  -  Next  the  additions  and 
deductions  are  added  and  listed  and  the  sheet  is  proved  by 
checking  the  grand  total  of  earnings  plus  additions  against 
the  total  net  amounts,  plus  the  deductions. 

After  the  items  have  been  run  on  the  pay  roll  sheet, 
the  clock  cards  are  re-distributed  to  the  card  racks  where 
each  workman  secures  his  card  and  signs  it.  He  then 
presents  his  card  as  a  receipt  at  the  pay  master's  window 
and  receives  his  pay.  The  cards  are  afterwards  filed  and 
kept  for  a  limited  time  and  the  pay  roll  sheets  are  placed 
in  a  loose  leaf  binder,  serving  as  a  record  of  the  amount  of 
money  paid  to  the  employes  in  the  different  departments.    • 

No  names  are  recorded  on  the  pay  roll  sheet.  This 
has  been  found  unnecessary,  because  the  clock  card  is  the 
original  source  of  entry  and  also  serves  as  a  receipt  from 
the  workman.  In  case  any  dispute  should  arise  the  clock 
card  is  consulted  rather  than  the  pay  roll  sheet. 

By  doing  away  ^with  writing  the  names  we  have 
greatly  simplified  our  pay  roll  and  made  it  possible  to 
prepare  it  in  much  less  time.  The  eflSciency  of  the  system 
can  be  judged  by  the  fact  that  it  takes  care  of  some  1400 
men  weekly  and  has  been  in  successful  operation  for  more 
than  a  year. 

We  also  prepare  a  pay  roll  summary  each  week, 
showing  only  the  total  amount  of  money  paid  out  for 
labor  in  the  different  departments.  This  summary  is 
made  up  with  the  adding  machine  as  shown  in  Figure  57. 


COST         KEEPING 


SHORT 


CUTS 


SUMMARY  OF  PAY  ROLL 

o 

FOR  WEEK  ENDING  12-11,  1909 

OEPT      SHEET 

DAY  WORK 

PIICC  WOBK 

TOT.. 

DEDUCTIONS 

.NET  AMOUNT  DUE 

«• 

* 

<f 

*■ 

* 

1 

72130 

225.45 

946S5 

650 

940^5 

2 

6  4  5.6  0 

6  4  5.6  0 

6  4  5.6  0 

3 

83  3j05 

83305 

8  3  30  5 

4 

57550 

42450 

LCOOOO 

2  5O0 

9  7  500 

5 

2  0  8.0  3 

447.96 

6  5  601 

33  6 

6  5  2.6  5 

6 

1,20000 

1,20000 

1.200O0 

7 

6  3  3.4  5 

6  3  3.4  5 

6  3  3.4  5 

e 

73450 

7  3450 

73450 

9 

1,52305 

1.5  2  30  5 

50  5 

1,5  180  0 

JIO 

35550 

35550 

35550 

.11 

6  4  4.6  6 

6  4  4.6  6 

644j56 

.12 

4  6  7.7  0 

4  6  7.7  0 

2O0 

4  6  5.7  0 

.13 

5  2  350 

52350 

52350 

.14 

3  5  6.7  0 

1  6455 

521.25 

5  2  1 .2  5 

i5 

1,52350 

1,52350 

350 

1.520O0 

J.6 

2^10455 

?,  1  0  4  5  5 

2,10455 

J.7 

2  3  5.6  6 

2  3  5.6  6 

2  3  5.6  6 

.16 

34456 

34456 

7O0 

33756 

i9 

42555 

42555 

42555 

.2  0 

1  4  6.7  6 

22555 

3  7  2.C  1 

3  7  20  1 

.21 

253^5 

8  4.6  5 

3  3  6.10 

5O0 

3  3  3.10 

22 

16455 

97>i4 

2  6  1 .9  9 

2  6  1.9  9 

.2  3 

6455 

6455 

6455 

.2  4 

52  350 

52350 

52350 

.25 

1  5  5.6  6 

7  3  650 

8  9  2.16 

1.15 

6  9  1 0  1 

.2  6 

1  66.45 

1  6  6.4  5 

5O0 

1  6  1 .4  5 

.2  7 

22350 

89455 

1.1  1  60  5 

1.1  1,60  5 

.2  8 

1  6  3.4  5 

L32555 

l,4g9O0 

1.4  8  9O0 

.3  9 

8  8.45 

8^.4  5 

lOO 

8  7.45 

30 

1,2  0  0.0  0 

1,2  0  coo 

1,20000 

o 

31 

1,52500 

3.525O0 

3.6  2 

1.521.38 

3  2 

15  3>i5 

500O0 

65ZA5 

653.45 

1^26335* 

11,746.40* 

24,01  1.75* 

6B.18« 

23^94357* 

Fig.  57  , 

Summary  of  Pay  Roll  made  on  a  Burroughs  Adding  Machine 


1Q4 


COST    KEEPING    SHORT    CUTS 

The  first   thing  done  upon  receipt  of  the  workmen's  A 
time  tickets  in  the  Cost  Department  is  to  sort  them  by  gystem 
departments  and  accounts  and  get  the  total  number  of 
hours  and  the  amounts  for  each  account  in  each  depart- 
ment by  adding  the  tickets  on  the  adding  machine. 

These  totals  are  posted  in  the  columns  on  the  left  hand 
side  of  the  proof  reports  for  the  various  departments  and 
the  grand  total  of  the  totals  for  the  various  amounts  on 
each  card  must  agree  with  the  current  day's  allotment,  as 
shown  by  the  total  hours  and  amounts  which  have  been 
entered  by  the  time  keeper  on  the  right  hand  side  of  the 
ca^d.  In  this  way  the  daily  distribution  of  labor,  by 
accounts  and  departments,  is  secured  and  checked.  See 
Figure  58. 

In  case  the  proof  report  is  for  a  department  in  which 
both  day  and  piece  workers  are  employed,  the  total 
hours  and  amounts  for  the  piece  workers  are  entered  in 
spaces  allotted  for  that  purpose  by  the  time  keeper,  so 
that  in  the  distribution  of  the  day  and  piece  workers' 
tickets  by  various  accounts  the  grand  total  will  check 
against  the  grand  total  that  appears  at  the  lower  right  . 
hand  side  of  the  proof  report. 

After  this  operation  is  completed,  the  time  tickets  are 
filed  in  cabinet  files  behind  their  respective  cost  record 
cards  and  continue  to  accumulate  day  by  day  until  the 
cost  keeper  receives  notification,  in  the  form  of  a  box 
card  which  follows  the  job  through  the  factory,  that  the 
job  has  been  completed.  The  proof  reports  in  the  mean- 
time are  filed  in  a  separate  compartment,  and  the  six 
cards  for  each  department,  covering  one  week,  are  recapit- 
ulated at  the  end  of  the  week,  in  order  to  secure  the 
weekly  labor  distribution  by  departments  and  accounts. 
Figure  58  shows  proof  reports  for  a  week  and  Figure  59 
shows  a  sheet  on  which  these  proof  reports  have  been 
summarized,  giving  the  total  hours  and  amounts  for 
department  5  and  accounts  15,  10  and  22  for  one  week. 

105 


COST    KEEPING    SHORT    CUTS 


DAILY  PROOF  REPORT.  dept  nc 


._  Date L 


Z   DAILY  PROOF  REPORT.  oept  no._b5::_  date 


HOURS  AMOUNT 


A? /tei^ i2,£? 


/^■y 


PRCCeoING  DAVS  ALLOTMENT 


HOURS  AMOUNT 


/^JZ  3il  ^ 


I 


I 


HOURS  AMOUNT 


/^         /OS i2^  ^  PRECEDING  DAYS  ALLOTMENT /(jTjg   __  3^    ^7 


HOURS  AMOUNT 


DAILY  PROOF  REPORT. 


Dept  No ft- 


v^ 


HOURS  AMOUNT 


/qT*         /go  ^  23     1*  PRECEDING  DAYS  ALLOTMENT  /^^i?    ^  Jjg    f^ 


HOURS  AMOUNT 


DAILY  PROOF  REPORT. 


~jj-j^r~ — 


/^\  ffm  22Y**\  PRECEDING  DAYS  ALLOTMENT  |    //jg^  |  ^  |        ^^Yf_ 


-1-^ 


DAILY  PROOF  REPORT. 


1j^-|     f^l      I— ^ 


11 


77 


4^^ 


PRECEDING  DAYS  ALLOTMENT 


HOURS  AMOUNT 


l.£^^^2^fL 


DAILY  PROOF  REPORT. 


lA. 


/CO 


^. 


d^ 


PRECEOINO  DAYS  ALLOTMENT 


M2. 


34^ 


V 


^ 


^ 


PLUS  NEW  EMPLOYEES 


^ 


S-o 


Jz.tk'A 


MINUS  EMPLOYEES  QUIT 


PLUS  OR  MINUS  CHANCES  Of  RATE 


PRESENT  ALLOTMENT 


JJLL 


% 


J^L 


PLUS  OVERTIME  AND  ALLOWANCE 


MINUS.  ABSENT  AND  LATC 


/Lf\%\  ^^\^ 


payroll]    /^f\%\      J^l^y 


Hurroufttn  Adding  Maililne  fo.  Fsclorj  Form  No.  137 


Fig.  58 
Daily  Proof  ReporLs  for  one  week  for  Department  5 


COST 


KEEPING 


SHORT    CUTS 


WEEKLY  SUMMARY  OF  LABOR  DISTRIBUTION 

FOR  WEtK  ENDING  ll-T.  1909 

MPT  MD 

DCTAILS                                 [ 

ACCOUNT  TOTALS                          J                OEPARTMINT  TOTALS 

NOS. 

HOURS             j 

AMOUNT 

HOURS 

AMOUNT 

HOURS 

AMOUNT 

5 

<, 

1  5 

10  2'A 

105 

100 

9  8^ 

99 
100 

2358 
241  5 
^300 
2  2.6  0 
2  2.7  7 
2300 

604% 

139.10* 

1  0 

42 
16 
•J7'A 
4  1 
4  0 
3714 

9.2  4 
7.9  2 
8.2  5 
9j02 
8.8  0 
8.2  0 

23  3% 

51^3» 

2  -^ 

37 
2154 
35 
2  5 
37 
2  4  5% 

5.9  4 
4.7  9 
55  0 
550 
5.9  4 
5.3  9 

15014 

3306» 

9  8  ay. 

22359« 

1  8 

256 

251J4 
340 

24  5 

24  7V4 
,3  5  1 

5  6.3  2 
55.28 
5  2.8  0 
5  3.9  0 
54.45 
5  5.2  2 

1  490H 

3  2  7.9  7  • 

1  4 

7  1 

72 
7  5'A 
70 
70 
71 

2201 
2  2.3  2 
^3.41 

21.70 
2  1.70 
2201 

4  2  914 

133.15* 

1  2 

1  9'A 
1914 
1  9% 
19'A 
19'A 
19'A 

60  5 
60  5 
60  5 
605 
605 
605 

117 

3,6.3  0» 

1  0 

3  11% 

27 

2  5% 

29 

30 

30 

75  6 
6.4  8 
6.18 
6.9  6 
7.2  0 
7.2  0 

17  3'/. 

4  15  e* 

1  7 

4  314 
4  4 
4  5 
39 

3  9  ft 

4  0. 

9.9  5 
1  0.1  2 
10.3  5 
8.9  7 
909 
92  0 

250% 

5  7.6  8* 

246114 

5  9  6.6  8* 

Fig.  59 

Miniature  reproduction  of  a  Weekly  Summary  of  Labor  Distribution 

prepared  entirely  with  the  Burroughs  Adding  Machine.     The 

hours  find  amounts  are  added  and  listed  simultaneoulsy. 


167 


COST 


KEEPING 


SHORT 


CUTS 


MONTHLY  SUMMARY  OF  LABOR  DISTRIBUTION 

FOR  4  WEEKS  ENDING  11 

-28.  1 909 

•eCOUNT 

DETAILS                                  1 

BURDEN 

ACCOUNT  TOTALS                     ( 

TOTAL 

HOURS 

AMOUNT 

HOURS 

1  5 
5 

6  0  4  y. 
610 
6  1  5  V4 
6  3  1 

13  9  10 
1  4  6  .4  0 
1  4  7 .6  6 
1  5  1 .4  4 

10 

114  7 
1  2  1  4  'A 
132  1 
1212 

2  6  3 .8  1 

2  7  9.3  4 

3  0  3.8  3 
278.76 

5  6  3.2  1 

2461 

5  8  4.6  0* 

22 

3  7  5'A 
410 
3  9  8  'A 
360 

1  16.4  1 
1  2  7.1  0 
12  3.4  6 
111.6  0 

1,1  0  5.3  0 

4  0  9  4  'A 

1,12  5.7  4* 

1  8 
6 

1  49054 
14  5  6 
1  4  3  2  Vt 
1  488 

3  2  7.9  7 

3  3  0.3  2 
3  15.1  5 
3  2  7.3  6 

367i8 
2,  0  3  5 .6  9 

154354 
3  89914 

47837* 
2,138.91* 

4,2  2  4.6  0* 

7 

2  3  4  1'/. 
2260 
2  19  854 
2  50  0 

7-1720 
7  3  3 .2  0 
7  0  3.6  0 
800.0  0 

1,075.20 

5  3  6  7/4 

1,290.80* 

9 

1110 
1  1  1  3  14 
1  1  2  5  '/4 
114  2      . 

2  4  4 .2  0 
2  4  4 .9  7 
24736 
2  3  1 .2  4 

2,7  3  1.10 

920  0 

a9  4  4.0  0* 

1  3 

3  0  654 
32  1 
3  4  5'A 
315 

9  8.08 
1  0  2 .7  3 
11056 
10  0.8  0 

9  3  2.3  4 

4  490% 

9  8  7.97* 

1  6 

3  6  1'A 
550 
571% 
569 

17  407 
17  050 
1  7  7.2  4 
17  6.3  9 

3  9  5.6  0 

1288 

4  12.16* 

17 

780 
787 
7  92 'A 
760 

2  4  1 .8  0 
2  4  3.9  7 
2  4  5.6  8 
2  3  5.6  0 

6  5  1.2  2 

2  2  5  2/4 

6  9  8.2  0* 

2  0 

2  2  0  1  'A 
2  23  1 
2  2  5  1  '/4 
3'2  6  0 

4  8  4.3  3 
4  9  0.8  2 
4  9  5.2  8 
4  9  7.2  0 

92130 

311914 

967X35* 

- 

1,9  123  0 
,    8;619JD6 

•894  3% 
3  5  1  6  1  V4 

1,967^3* 
9.267.81* 

17.88  6.67* 

Fig.  60 
A  Monthly  Summary  of  Labor  Distribution  made  with  a  Burroughs 
Adding  Machine.     The  hours  and  amounts  are  added 
and  Hsted  simultaneously. 


168 


COST    KEEPING    SHORT    CUTS 

The  summary  sheet  also  includes  labor  distribution  A 
for  department  6  and  accounts  18,  14,  12,  10  and  17,  gystem 
which  is  taken  from  similar  proof  reports  for  department 
6.  At  the  end  of  the  month  the  four  weekly  labor 
distribution  summaries  are  recapitulated  for  the  monthly 
summary  in  such  a  way  that  the  monthly  totals  of  labor 
distribution  are  shown  for  the  various  departments 
falling  under  the  different  accounts.  Thus  in  Figure  60 
the  upper  part  of  the  sheet  shows  the  labor  distribution 
for  account  15,  which  is  the  first  item  in  the  left  hand 
column  and  is  divided  to  cover  Departments  5,  10  and  22. 
In  this  way  we  secure  the  total  amounts  of  labor  to  be 
posted  to  the  various  accounts  in  the  factory  ledger. 
The  posting  is  done  once  a  month. 

In  addition  to  the  labor  distribution  by  accounts,  we 
keep  a  record  of  the  distribution  to  sub-accounts,  as 
shown  in  Figure  61.  In  this  case  the  account,  No.  .74-05, 
refers  to  the  repairs  on  tools  and  dies  for  the  screw  machine 
department. 

While  the  regular  monthly  distribution  will  show  the 
total  labor  and  burden  to  be  charged  to  account  74,  it 
does  not  analyze  it  sufficiently;  hence  the  use  of  the  sub- 
account distribution  cards. 

The  sub-accounts  for  repairs  are  closed  monthly  and 
the  time  tickets,  covering  the  labor  for  this  purpose,  are 
sorted  first  by  accounts  and  then  by  sub-accounts,  then  by 
departments,  and  the  total  hours  and  total  labor  for 
each  department  are  secured  with  the  adding  machine  and 
posted  on  the  card.  Then  from  these  cards  the  entries 
can  be  made  to  the  sub-accounts  in  the  factory  ledger. 

When  a  job  has  been  completed  all  the  time  tickets. 
Figure  48,  and  material  requisitions.  Figure  62,  referring  to 
that  job  and  which  have  been  filed  behind  the  cost  record 
card,  are  first  sorted  by  departments  and  then  added  and 
listed  on  the  adding  machine,  securing  the  total  labor 
cost  for  each  department  that  has  worked  on  the  job. 

169 


COST    KEEPING    SHORT    CUTS 


OPERATING    EXPENSE    SUB-ACCOUNTS       no.      7^       OS 
.......  ScAJLu^  "hLojJr..  cS^A^  !".?;„.,  (&/u,U^^  ^-0^*^  y  (&.U^ 

5^7/ 

DEPT. 

HOURS 

LABOR 

f 

BURDEN 

TOTAL 

MATERIAL 

MONTHLY          1 
TOTAL             1 

f/z6 

/ 

z 

•?? 

3Z 

z, 

..A. 

13 

.^^.... 

/ 

24 

oa 

Iz 

m 

^77 

ft 

4 

9/ 
S4 

4 
38 

as 

,, 

SI 

/77 

77 

- 













■  .  *.  M.  CO.-l47»-»0O-*-I0-T    8.  P.-COST-P.  •  ».                                                                                                                                                                                                                                                                1 

Fig.  61 
Operating  Expense  Sub- Accounts  Card 


ORDER  Ho fr.. 

SYMBOL™ /.oh 


SUPPLY  REQUISITION. 

.-,..,......DATE 7/ZSj/± 


._>CC'TNo. 


// 


QuAMTrrv 


%ff 


DES0R1PT10N 


Value 


^^ 


DELIVERED  TO 


, _JJ3_ 


DELIVERED  BY 


J3l 


:?^*^. 


Burrouftts  ><!()>•£  K^civn*  CoJMrtorT  ( 


Fig.  62 
Supply  Requisition 

170 


COST    KEEPIXC;    SHORT    CUTS 


COST     RECORD  lot  no 


DATE  OF  ORDER- 


^"^-/O 


NAME  OF  PART 

STARTED  IN_.--'Z— ^^ 


.DEPARTMENT 


:[-_; 


DESCRIPTION  OF  MATERIAL  OR   PARTS  UStD 


JMBER   PARTS   WANTED 


NUMBER   PER   BOX 


»BER    PARTS  TRANS  F  D 


MO.    PARTS   FINISHED 


^ 


oo 


//cT 


G96 


DATE   DUE 


NUMBER  OF   BOXES 


y  NUMBER    PARTS   DESTROYED         I  DATE   REC'D   FIN.   STOCK 


Fig.  63 


SYMBOL  a  LOT  NO.  Z 

LABOR    &    BURDEN     COST   /-aco/1:^7 

)ATE 

DEPT 

HOURS 

LABOR 

BURDEN         Ij                                                       SUMMARY 

3 

3S/4 

i 

// 

jJ-\''^\                           DETAILS 

ITEM 

TOTAL 

7 

/ 

91 

/ 

LABOR 

Zo 

8o 

-, 

7 

7 

/ 

IS 

/ 

27 

ZS 

s 

*»s 

___4^^ 

fO 

BURDEN 

// 

/o 

LESS  ITEMS  TRANSF  D 
F   O 

F.  O 

F    O 

F   O 

F   O 

MATERIAL 

92 

/? 

^ 

rz^ 

124 

Of 

i 
1 

i-J 

UNIT  COST        •    '   '  O 

L_J 

1 J 

I^BO 

_ 

Fig.  64 
171 


COST 


KEEPING 


SHORT 


CUTS 


A 

Cost 
System 


These  totals  are  then  posted  to  the  back  of  the  cost 
record  card,  Figure  63,  as  shown  in  Figure  64,  which  in 
this  instance  is  a  cost  record  for  a  dash  symbol.  The 
cost  cards  for  straight  and  dash 
symbols  are  blue  and  white,  re- 
spectively, in  order  that  they  may 
be  easily  distinguished. 

The  object  of  securing  the  total 
labor  cost  by  departments  is  for  the 
purpose  of  extending  the  burden, 
which  varies  according  to  the  de- 
partment. 

After  this  burden  has'  been 
extended,  the  total  labor,  material 
and  burden  are  entered  on  the 
right  hand  side  of  the  card  and  the 
grand  total  shows  the  cost  of  the 
job.  Then  by  dividing  this  grand 
total  by  the  number  of  parts  turned 
out,  the  cost  for  the  part  is  secured. 
The  number  of  parts  and  their 
cost  having  been  secured  in  this 
manner,  they  are  transferred  to 
the  cost  keeper's  record  of  finished 
stock,  as  shown  in  Figure  69.  This 
record  is  kept  by  the  cost  keeper, 
in  order  that  all  finished  parts 
may  be  charged  out  at  their  cost. 
The  cost  of  parts  often  varies, 
according  to  the  conditions  under 
which  they  are  manufactured,  the 
market  price  of  raw  material,  etc. 
The  stockkeeper  also  keeps  a 
perpetual  record  of  the  finished 
stock,  but  does  not  record  the 
Fig.  65  ^ost,  his  record  having  to  do  with 


-:< 

3.0  0 

.8  0 

6.0  0 

2.0  0 

4.0  0 

2.0  0 

3.0  0 

5.0  0 

3.0  0 

1.0  0 

2.0  0 

2.0  0 

3  3  .8  0  - 

3  9.8  0 

2.0  0 

4.0  0 

6.0  0 

6.0  0 

4.0  0 

6  0  0 

6.0  0 

6.0  0 

7  9  .8  0  s 

9  9,  9  6  6  .2  0 

.      4  6  .0  0  - 

172 


COST 


KEEPING 


SHORT 


CUTS 


quantity  only,  as  shown  in  Figures  67  and  68.     The  card  A 
shown  in  Figure  67  is  his  record  of  what  we  call  straight  gystem 
symbols,  meaning  those  parts  which  are  of  one  piece  only, 
and  the  card  shown  in  Figure  68  is  the  record  for  dash 
symbols,  which  are  parts  composed  of  two  or  more  pieces 
combined. 

In  this  connection  attention  should  be  called  to  the  use 
of  the  adding  machine  for  checking  these  records.  Figures 
65  and  66  show  the  actual  adding  machine  work  to  check 
completely  the  straight  and  dash 
symbol  cards,  respectively. 

The  method  is  as  follows :  Add 
the  amounts  delivered  and  take  a 
total.  Then  add  the  balance  on 
hand  at  the  beginning  of  the  period 
and  the  quantities  received  and 
take  a  sub-total.  Then  add  the 
complement  of  the  total  amounts 
delivered  and  the  remainder  should 
agree  with  the  last  balance  of  the 
"In  Stock"  column.  Since  the 
items  are  carried  over  to  the  back 
of  the  cards,  when  the  face  has 
been  filled,  the  machine  is  indis- 
pensable for  securing  a  quick 
check  on  the  last  balance  before 
carrying  it  over  to  the  back  of  the 
card. 

When  a  requisition  is  made  on 
the  finished  stock  room  for  straight 
symbols,  the  amount  is  entered  on 
the  finished  stockkeeper*s  record 
and  the  requisition  forwarded  to 
the  cost  keeper,  who  enters  the  cor- 
responding amount,  together  with 
Fig.  66  the  price,  on  his  record. 

173 


'l' 

4  0.0  0 

4  0.0  0 

8  0  .0  0  " 

4  0.2  0 

4.0  0 

1  2.0  0 

1  2.0  0 

8.0  0 

4.0  0 

8.0  0 

4.0  0 

8.0  0 

4.0  0 

8.0  0 

4.0  0 

4.0  0 

1  2  0  .2  0  s 

9  9,  9  2  0  .0  0 

4  0  .2  0  "''^ 

COST 


KEEPING 


SHORT 


CUTS 


STRAIGHT  SYMBOL 

3^^"^      ^^ 

HIGH    MARK        6  0  0  0 

ENTERS  DAS 

H       /-3it'>- 

LOW      MARK      /J.OOO 

AMOUNT  USED  IN   FOLLOWING  STYLES  AND  CONSTRUCTIONS: 

PCS. 

STYLE 

C0M8T. 

PCS. 

STYLE 

CONST. 

PCS. 

STYLE 

CONST. 

PCS. 

STYLE 

CONST. 

( 

7 

cut 

/ 

9 

aie 

ORDERED         II                    RECEIVED 

1 

DATE 

r 

QUANTITY 

|LOT 

PAN  NO. 

QUANTITY 

SCUPPIB 

^  DELIVERED 

IN  STOCK 

/-/-// 

b^ 

c,^ 

//^OAo 

/ 

s 

<fooo 

Z/Zo 
3/, 

^OOO 

3.0 

- 

g    ^. 

/4/3/ 

4-0  0 

4Zo 

i% 

/Aoo 

/(,  Zo 

7 

lf^'^7 

/:t.oo 

^g  Zo 

t% 

'foo 

ioo 

26>i.o 

„ 

t" 

fsss4- 

tf-oo 

4oZo 

n 

f'U 

i'4-9ot 

ioo 

42ZO 

It 

!" 

/VVVA 

*f-oo 

fS-aAo 

A¥ 

g% 

ioo 

(>oZo 

Z7 

r' 

'33ft 

4oo 

<o^ZO 

ti 

s% 

ifs-s-S 

?oo 

,     7zi.o 

df 

i" 

t33fZ 

4oo 

7(>Zo 

•^M'l 

/^ 

/USiJ 

tf-oo 

SoZo 

1 

1 

tooo 

^oZo 

1 

._H..oo.o..c-..co.™...... 

......... 

Fig.  67 
174 


COST 


KEEPING 


SHORT 


CUTS 


DASH  SYMBOL 

/ 

'36^^      #y 

CONSISTS    OF 

/ 

34.i^^f 

/ 

3iiL 

/ 

JrS-^L'^ 

/ 

(b  3^;^. 

/ 

os-j^        1    / 

3<f:f. 

' 

HIGH   MARK         ^GOO                                ENTEI 

^S  DAS 

H 

IO«l      MARK           ^OOO                        ^Xle***^. 

U<^  JL-^y^C.  «^€X/ 

AMOUNT  USED  IN  FOLLOWING  STYLES  *NO  CONSTRUCTIONS: 

PCS. 

STYLE 

CONST. 

PCS. 

STYLE 

CONST.        PCS. 

STYLE 

CONST.        PCS. 

STYLE 

CONST. 

f 

7 

aet 

f 

? 

cue, 

ORDERED         II                    RECErVED 

DATE 

LOT 

OUAHTITY 

|LOT 

PAN  NO. 

QUANTITY 

SCUfPU 

DELIVEREO         11           IN  STOCK 

/■/-// 

C 

^- 

l.O-«-> 

iZ^^^^ic/^ 

1     s39^o 

/o 

/ 

3oo 

S/^fo 

'   /«- 

9o 

,3^no 

1% 

Cioo 

3ooo 

Zoo 

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^/,c 

tfoo 

il4-oo 

IS- 

too 

a^oo 

2o 

3oo 

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Zo 

f(^ 

dooo 

Ito 

Zo 

oToo 

/t^oo 

is 

f3oo 

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2.1 

/ o o    i        t  o  oo 

5// 

aoo 

ino 

r 

lO 

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Aoo 

/ODD 

ff^yy^ 

4oo 

/tloo 

n 

«^* 

6oo 

cL  n  oo 

/d 

//;* 

(oOO 

£.^oo 

IS 

</'^/ 

^oo 

3 

noo 

n 

Aoo 

JP.^oo 

/(? 

/^'^?^ 

t 

6)00 

.'3iAoo 

*2/ 

M 

C>oo 

■ 

^oo  o 

It 

wy%\ 

6oo\ 

^^oo 

•••" 1 

Fig.  68 
175 


COST 


KEEPING 


SHORT 


CUTS 


d 

z 

z 

0 

u 
u 

< 

en 

Q 
liJ 
I 
(/) 

z 
u. 

u. 
0 

Q 

0 
0 
UJ 

q: 

N 

UJ 

_l 
>- 

0 
0 

-I 
0 
m 

2 

5 

0 

2 

u 

z 

1 

Q 

Q 
u 

D 

0) 

z 

a 

0 

5 
< 

§ 

« 

^ 

0 
0 

Q 

* 

^>s. 

«9 

QK 

NO 

CO 

\ 

^ 

\ 

u 
5 

0. 

5- 

t 

* 

« 

2 
< 
3 
O 

o 

0 

O 

0 

o 

^ 

Q 

^ 

Q 

o 

v^ 

^ 

-^ 

< 
0 

Q 
UJ 

> 

UJ 

1;! 

z 

D 
0 

l\ 

r 

Ci 

^ 

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Csj 

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i 

^ 

1 

z 

o 

0 

vo 

0 

O- 

^ 

\o 

<n 

Ul 

a 

!5 

^ 

!• 

u 
t- 

Q 

>J0 

■s. 

« 

176 


COST    KEEPING    SHORT    CUTS 

In  the  case  of  dash  symbols  the  raw  stockkeeper  issues  A 
these  upon  requisition,  but  it  is  not  necessary  to  forward  SyTtem 
the  requisition  to  the  cost  keeper,  because  the  cost  record 
card,  covering  the  assembhng  of  these  d^-sh  symbols  into 
sections,  shows  the  number  of  dash  symbols  that  are 
required  for  the  job,  together  with  the  number  of  sections 
to  be  made,  so  that  after  the  job  has  been  completed  he 
can  make  the  proper  deduction  for  the  parts  that  make 
up  the  dash  symbols  from  his  stock  record  by  making  a 
simple  calculation  from  data  furnished  by  the  cost  card. 

The  cost  keeper's  stock  records  and  those  of  the 
finished  stockkeeper  are  checked  against  each  other  -from 
time  to  time  in  order  that  no  discrepancies  may  creep  in. 

For  the  purpose  of  illustrating  more  clearly  several  of 
the  adding  machine  uses  in  connection  with  time  tickets. 
Figures  70,  71  and  72  are  shown. 

Figure  70  shows  five  tickets,  representing  work  that 
has  been  done  in  Department  18  and  chargeable  to 
Account  31.  These  constitute  only  a  part  of  the  total 
labor  expended  on  a  job,  but  show  the  amount  expended 
on  Symbol  416  in  Department  18.  Since  Department  18 
carries  a  rate  of  burden  different  from  any  other  depart- 
ment working  on  Symbol  416,  it  is  necessary  to  separate 
the  tickets  for  this  department  into  a  group  to  themselves, 
and  then  add  the  labor  hours  to  get  the  total.  This 
addition  is  shown  in  the  upper  half  of  the  adding  machine 
example,  the  total  being  22  hours.  The  burden  rate  per 
hour  for  this  department  is  17  cents.  The  22  is  then 
multiplied  by  the  17,  as  shown  in  the  lower  half  of  the 
example  and  the  total  burden,  $3.74,  is  secured. 

Problems  like  this  arise  continually  in  our  cost  depart- 
ment and  are  handled  with  great  speed  and  accuracy  on 
the  machine. 

Figure  71  shows  a  group  of  five  time  tickets  for  day  , 
workers,  the  extensions  of  which  are  to  be  checked.     The 
first  ticket  has  2  hours  at  28  cents  per  hour  and  an  earning 

177 


COST    KEEPING    SHORT    CUTS 

A  of  56  cents.  This  extension  is  checked  as  shown  in  the 
System  ^^^^  problem  at  the  right-hand  side  of  the  illustration  by. 
multiplying  the  28  by  2  on  the  machine  and  pointing  off 
two  places  by  drawing  a  line  with  a  pencil  or  pen. 

The  next  ticket  is  checked  in  a  similar  manner,  using 
5.^5  instead  of  534  and  pointing  off  the  result  four  places. 

A  pile  of  tickets  can  be  checked  in  this  way,  recording 
the  results  on  the  adding  machine  tape  and  afterwards 
reading  back  beginning  at  the  top  of  the  tape  and  with 
the  first  ticket. 

Fi'gure  72  shows  five  time  tickets,  the  extensions  of 
which  are  to  be  checked.  In  this  case,  however,  the 
tickets  are  for  piece  workers  and  therefore  the  extensions 
result  from  multiplying  rates  per  hundred  by  the  number 
of  pieces. 

The  same  method  is  used  as  in  Figure  71,  the  adding 
machine  figures  being  checked  back,  after  running  off 
the  extensions  for  a  batch  of  tickets,  one  after  another, 
on  the  tape. . 

These  examples  will  give  an  idea  of  the  immense 
amount  of  time  and  labor  that  can  be  saved  in  handling 
hundreds  of  tickets  daily. 


178 


COST 


KEEPING 


SHORT    CUTS 


Fig.  70.     Five  Time  Tickets  for  Account  31,  together  with  adding  machine  list  of  workmen's 

earnings  and  calculation  of  burden. 

179 


COST 


KEEPING 


SHORT 


CUTS 


Fig.  71 

Five  Time  Tickets  for  Department  No.  la  and  Adding  Machine  slip 
showing  multiplication  of  time  and  rate  in  checking 
the  earning  of  each  workman. 


180 


COST    KEEPING    SHORT    CUTS 


TIME  TICKET 


Z^ 


KMAN'S  No. 


2-<f/oB.^      /o3(.o 


ii     U-i-4-  f^?^-<i 


^'/z 


>9ro 


ACCOUMT  I 


.^6- 


i     TIME  TICKET 


AOL 


^,-.«u-.<i^ 


OsOtR  NO. 


SYMBOL 

/7oj  H 


Box  No. 


/7//° 

No.  Piece 


^ 


1± 


3'4 


Z2o 


2/0 


ACCOUMT  ^ 

3/ 


Vk£ 


TIME  TICKET 


WORKMAN'S  I 


^^ 


SYMBOL     ^ 

Us- "'A 


Box  No. 


•^4, 

^"-2 


T% 


l4o.  PlECi 


n 


Pieces 


/c* 


Z7i^ 


9/ 


TIME  TICKET 


Department  No. 


«7_ 


jvC«-^s,i^ 


^/^/^^ 


Box  No. 


'hh^ 


cT/-  ^ofl     ;?^  -s4  -  f<r^ 


Time 
4^ 


*/^^ 


Name 


^     TIME  TICKET 

I 


icJ' 


z/^g 


«?/ 


/    2J 


:>JL.^ 


Symbol 


U 


//  ^-ys-*/- 


H    /- 


Operation 


i>'U 


No.  Pieces 


y^ 


^7^7 


AcCOUMT  No. 


3/ 


\?bi 


^.<yU(feU*"-   2  7.6  6* 

3.8  0 

3.8  0 

3.8  0 

3.8  0 

3.8  0 

3  8.0  0 

-       3  8 .0  0 

3  8.0  a 

3  8.0  0 

iWl-OO* 

27.61* 


2  2.0  0 
2  2.0  0 
2  2.0  0 
2  2£)0 
2  2.0  0 

l\lO.OO* 

2  7.6  2* 

12X)0 
1  2X>0 
12.0  0 
12XD0 

1  2.0  0 
1  2000 

l\8  0O0* 

2  7.6  8* 

4.9  3 
4.9  2 

4.92 
■       452 

4.92 
49J20 
4  9.2  0 

l\2  3X)0* 

2  7.6  7* 

50X)0 
50j00 
50X30 
50O0 


■7 


Time  Finished 


j:^^- 


&:o. 


FOREMAN'S  O/K. 


Fig.  72  ' 

Five  Time  Tickets  for  Department  No.  27  and  Adding  Machine  slip 
showing  the  multiplication  of  the  number  of  parts  by  the  rate  per 
hundred  in  checking  the  earning  of  each  workman. 


181 


Valuable 
Data 


CHAPTER  XX 
Information  for  the  General  Manager 

THE  following  forms  illustrate  valuable  d-ata  that  is 
collected  and  tabulated  by  the  adding  machine. 
This  information  is  very  instructive  for  the  man- 
agement and  is  brought  together  in  a  way  that  enables 
the  manager  of  a  plant  to  gather,  at  a  glance,  the  status  of 
his  business,  both  regarding  costs  and  sales. 

The  sheet  illustrated  in  Figure  73  shows  how  a  monthly 
summary  of  materials  charged  to  various  accounts  can  be 
recapitulated  on  the  Burroughs  Machine.  This  is  secured 
by  sorting  every  week  all  material  requisitions  on  com- 
pleted jobs  by  accounts  and  recapitulating  them  on  the 
machine.  By  using  a  Duplex  Machine  the  totals  for  each 
account  and  the  grand  total  for  all  accounts  are  obtained 
at  one  run. 

The  facsimile  sheet  in  Figure  74  is  a  Cost  of  Produc- 
tion Report  that  is  collected  from  data  furnished  by  the 
cost  department.  The  amounts  are  fictitious  but  illus- 
trate the  principle.  They  show  the  number  of  various 
kinds  of  machines  manufactured  during  the  month,  their 
cost  and  the  average  cost  per  machine.  A  glance  at  this 
sheet  gives  as  much  information  as  an  hour's  study  of  a 
detailed  cost  record. 

The  illustration  in.  Figure  76  is  a  comparative  state- 
ment of  sales.  The  amounts  are  fictitious  but  the  sheet, 
when  made  up  of  actual  figures,  shows  the  number  of 
hand  machines  made,  the  styles,  value,  cost  and  profit  on 
each  style,  both  for  the  current  month  and  for  the  corres- 
ponding period  the  previous  year. 

A  statement  of  this  kind  is  easily  prepared  on  the 
adding  machine  and  furnishes  valuable  data  to  the  man- 
agement.    It  is  a  growth  indicator  that  can  be  read  in  a 

182 


COST 


KEEPING 


SHORT 


CUTS 


REPORT  OF  RAW  MATERIALS  AND  SUPPLIES  USED 

o 

STORES  FOR  4  WEEKS  ENDING.  1 1  -28.  1 909              | 

ACCOUNT 

WEEK  ENDING 

WEEK  ENDING 

WEEK  ENDING 

WEEK  ENDING 

11 -a» 

WEEKENDING 

TOTAL 

«i>. ' 

1 

15336 

1   6   3.4  5 

16  8.6  7 

13436 

6  2  0.2  4* 

2 

430O6 

4  2  4  .0  0 

4  0  0.0  0 

5  2  3 .4  0 

1,777.4  6* 

3 

1  3  4 .6  0 

1  6  0.0  0 

19  4.6  7 

10436 

5  9  3.8  3* 

4 

1  5  6.0  6 

18,6£)7 

1  0  3.0  5 

1  6  6.6  6 

61  1.84* 

5 

5,0.6  7 

84£)5 

7  33  7 

1  2.0  3 

220.32* 

6 

766X)7 

73430 

7  3  6.7  8 

7  4  5.6  0 

2,9  8  2.95* 

7 

3  2  0.3  5 

22030 

40035 

i  0430 

1.C4  5.7  0* 

8 

4  4  6.6  0 

50000 

47430 

2  6  4  .4  6 

1,68535* 

9 

3  6  5.6  6 

374.07 

264X55 

4  10.2  4 

1,414X52* 

.10 

157.88 

1  0437 

1  4  6.7  8 

1  8  0.8  9 

5  9  0.12* 

.li 

78jOO 

e0X)0 

9  03  6 

6  6.09 

^14.6  5* 

.12 

1  00X)0 

103>V0 

10435 

1  4  4 .6  0 

45  235* 

.13 

7  5.6  6 

8  0.6  6 

7536 

2  0.45 

2  5  2.3  5* 

.14 

3  6  5.6  6 

411.30 

2  5  5.7  0 

264.45 

1,2  9  7.11* 

.15 

53450 

To  6.7  8 

202»5 

23  336 

1.377.29* 

.16 

24j00 

1  2  0.6  7 

14.7  2 

11.3  5 

1  7  0.7  4* 

J.7 

.18 

1  7437 

275j06 

1  4  4  .4  4 

1  7037 

7  6  4.6  4* 

9  7.7  0 

8  7.7  8 

7  6.9  0 

1  0  2£)  5 

3  6  6.4  3* 

.19 

2  4  4.6  0 

29930 

2  8  6.6  7 

2  8  7.7  6 

l.l"l833* 

£0 

2  8  7.6  7 

290X>0 

23430 

233.44 

1.0  4  5.61* 

J31 

1  3530 

1  8430 

17036 

13  4.6  0 

6  2  5.16* 

.2  2 

5  4  5.6  0 

5  8  8.0  5 

53336 

53330 

2,2  0  0.71* 

.23 

20436 

3  0  2X)S 

204X)5 

A02A6 

1.1  13.1  2* 

.24 

2  0  2.2  0 

2  5  6.7  7 

2  4  6.7  0 

2  4  5.6  6 

95133* 

o 

.2  5 

1  2  23  a 

1  6  6.8  8 

1  3  6.3  5 

1  2  2£l5 

5  4  7.7  8* 

%1  74J33* 

Si604.63* 

5,7  4  1.6  6* 

5^619^8* 

24,1  40j03< 

Fig.  73 

Report  of  Raw  Materials  and  Supplies  prepared  with  a  Burroughs 
Adding  Machine. 


COST 


KEEPING 


SHORT 


CUTS 


COST  OF  PRODUCTION 

o 

MACHINES  MANUFACTURED                        MONTH  ENDING  11-30.  1909 

STYLE  AND 
CONSTRUCTION 

QUANTITY 

COST 

COST  PER    MACHI 

ME 

MONTH 

YEAR 

MINIMUM 

* 

* 

6--X 

.12 

1,10  6.6  4 

9  2.2  2 

9  1.3  0 

9  0O4 

6— H 

J.4 

1, 8  2  4  .9  0 

13  0.35 

1  2  9.31 

1  2  7^0  7 

6-H 

.12 

1.8  0  3.9  6 

1  5  0.3  3 

1  5  2.4  6 

15  0.4  4 

7-H 

21 

2,786.07 

1  3  2.6  7 

1  3  3.0  0 

1  3  1.2  5 

7-G 

JZO 

3.2  4  8.8  0 

16  2.4  4 

1  6  5.3  5 

1  6  2 .0  7 

7-H 

.1  4 

2,2  7  3.0  4 

1  6  23  6 

1  6  0.8  6 

1  5  9.0  9 

7— H-El . 

22 

4,3  4  3.6  8 

197>»4 

19855 

1  9650 

9-H 

.15 

2,7  85.95 

1  8  5.7  3 

1  84>t6 

1  8  3.2  0 

9— H-El. 

.15 

2^4  7  0.7  0 

2  3  1.3  8 

2  3  0.31 

2  2  8.3  3 

9-G 

1.6  7 

3«S,001.£4 

1  9252 

29651 

1  9  1 .3  0 

9— G-El . 

2.0  6 

4  8,2  2  6.6  6 

2  3  4.11 

2  3  5 .1  7 

2  3  2.0  4 

9-H 

2.3  5 

4^3  6  6.7  6 

19  3.0  5 

1  9552 

1  9  0.2  4 

9— S&n-El. 

1.9  6 

4  6,455^3 

2  3  7-.0  2 

2  3  7.3  3 

2  3  1.0  4 

9— H-El . 

2.40 

5  4,2  6  6.4  0 

2  2  6.11 

2  2  5.16 

2  2  0.0  6 

9— K 

.7  5 

16,5  8  4.7  5 

2  2  1.13 

2  2  2.7  7 

216.33 

9-K-El. 

.3  0 

7,5  3  2.70 

2  5  1 .0  9 

2  5  0.1  2 

2  4  7.0  6 

9— S&N-K-El. 

.12 

3,2  5  4.7  6 

2  7  1 .2  3 

2  7  2.4  1 

2  7  0.13 

.1  1-H 

1>»6 

3  2, 5  3  9 .0  3 

2  2  2.8  7 

2  2  2.4  7 

2  2  0 .0  4 

.1 1— S&ll-H 

•43 

9.7  2  3.0  0 

23130 

2  3  2.14 

2  3.1.0  3 

il--H-El. 

J51 

6^7  18.7  5 

2  8  1.2  5 

28451 

2  8  0.3  0 

.1  3-H 

.13 

2,79636 

2  3  3.0  3 

2  3  3.6  6 

2  3  1.12 

•13-H-El. 

4 

1,1  SBAa 

2  8  2.1  2 

2  8  5.7  5 

2  8  0.2  3 

J.  5— Stll-H 

^a 

2^392.00 

2  7  6.0  0 

2  7  3.1  3 

2  7C.0  4 

.15— SMI-H-El. 

1.6  3 

4  7, 6  1  2.3  0 

2  9  2.10 

2  9  0.13 

2  8  5'5  0 

J.  5— S&K-K-El . 

.9  5 

3  1,4  4  5.9  5 

3  3  1 .0  1 

3  3  2.1  4 

3  2  8.2  2 

.1  6— VS-H-El . 

.4  2 

13,12  2.90 

3  1  2.4  5 

3  1  0.6  6 

3  0  7 .0  4 

.1  5— VS-K-El . 

.17 

5,6  4  4.3  4 

3  3  2.0  2 

3  3  2.2  8 

3  3  0.0  5 

o 

S  5— H-ACT-El . 

.16 

5^45952 

3  4  1.2  2 

341^10 

34056 

.15— H-Shut-El. 

.14 

2  0.0  ON- 

4,664.10 
4  6  9,579.64* 

3  3  3.15 

3  3  0.0  2 

3  2  8.2  4 

Fig.  74 

Production  Cost  Report  made  on  the  Burroughs  Adding  Machine. 
The  descriptions  are  written  with  a  typewriter. 


184 


COST 


KEEPING 


SHORT 


CUTS 


o 

COMPARATIVE  STATEMENT  OF  SALES 

CURRENT  MONTH 

CORRESPONDING  PERIOD  LAST  YEAH                       I 

satcm 

COST  or 

SALES 

mtOFIT 

.   »-" 

SALES 

raoriT 

outirriTY 

lUMt 

-- -/ 

»>UIC 

• 

• 

. 

. 

« 

. 

> 

3 

-17 

^82535 

3il73.12 

652.23 

4 

1  4 

2i6«355 

^14235 

52120 

6-n 

J22 

^52455 

4,52435 

1,00000 

20 

4,  5  0  4  >1  0 

3i782.94 

7Z1A6 

6-12J 

ZX 

£i256O0 

4,134.50 

1.121>»0 

i8 

3.4  6  032 

2.82707 

63325 

7-B 

32 

e.83450 

7,3  6  2.25 

1.4  7  2.2  5 

25 

6i2  5  5.7  5 

^1  32.75 

112300 

7-12i 

35 

1Q53450 

8153434 

acooie 

27 

6,7  5  621 

£i643£8 

1,11233 

9-10 

1.7  5 

6eil34J0O 

54,4  12.60 

13.721.40 

1.45 

3  9,9  4  73  0 

3  4,5  8  2.9  5 

^36455 

9-l2i 

1.3  3 

49,52430 

4  1,9  12.0  9 

7,61  2>«1 

125 

37,5  4  3.75 

32,40920 

^13435 

9-12J-SI 

125 

5C1245aO 

4  1.2  8  23  9 

e,9  6  2j»l 

1^2 

4Z1C50.40 

3  4,7  153  5 

7,33435 

9-18-SI 

1..5 

58,02035 

45^87930 

12,14125 

120 

48^232X30 

4C1337>I5 

7,94435 

Xl-12i 

16 

^805.75 

5^84035 

96520 

4.2 

4,84430 

4,05955 

78435 

11-12J-SI 

3t 

13H43JJ5 

11,4  2  1.8  3 

1.7  2  1.4  2 

22 

9,3  6  24  0 

8iC'l6.7  0 

1,345.40 

11-12-i-Sint 

12 

^405^5 

4,61738 

7  8  7.6  7 

40 

4,225X30 

3,46634 

7  5  6.6  6 

13-I2i 

e 

3^803^5 

3^269.25 

53420 

6 

^7  0  2j0  4 

2188^0 

513>«4 

13-12i-Smt 

23 

9,9  2  5£0 

4200.70 

1,72430 

42 

£i704X38 

4,65938 

1,04430 

15-121- SB 

li3 

46^17500 

4^05433 

%J2  0J.7 

1j0  2 

45194458 

3et58»3i 

r.35  j30 

15-l8-srf 

26 

1^5  0  2X35 

1C1602XJ5 

1.90000 

23 

lCi9  3  2£2 

9,29  837 

J.63<>»5 

l5-l2i-SBt 

35 

1613  2  23  0 

1M88J27 

2^13423 

29 

i.0,*56A6 

9,3  3  60  6 

1.1  20^0 

lV12i-VS 

35 

19,23330 

14993^5 

2,24036 

31 

1^281£2 

13,6  4  83  6 

£^633^4 

15-18-73 

26 

14,30639 

1^366^5 

t9  4  0.10 

24 

1564046 

11.53736 

210230 

15-12i-ACI 

e 

4,244;a0 

3;28338 

9  6  0,4  2 

15-12i-Sht 

4 

%3463Q 

1,7  6  4X3  8 

5  8  2^2 

1052* 

4  1  8^7  7  5^0* 

35(i95951* 

67.8  15^9* 

8.63» 

?iai8  9  44  9* 

264,23331* 

4^66038*' 

o 

^ 

Fig.  75 

This  Comparative  Statement  of  Sales  is  a  valuable  index  to  the  growth  of 

the  business.     All  except  the  description  is  tabulated 

with  the  Burroughs. 


185 


COST         K    E    E    P    I    N    G    i    jS    H    O    R    T         CUTS 


COMPARATIVE  STATEMENT  OF  EARNINGS 

MONTH  ENDING  11-30.  lOOgj 

o 

PARTICULARS 

CURRENT  MONTH               ||      COR.  PERIOD  LAST  YEAR         | 

JAN.  1,    09.  TO  DATE             | 

AMOUNT 

<T...L<>                  AMOUNT 

TO  ••ica 

AMOUNT 

<To..m 

Gross  I.:fpr.   Profit: 

* 

* 

* 

Rognlftr  y.achlnes 

115v467J!5 

10^416^35 

1,121,40650 

Special   :.:Rchlnes 

8  2,315.17 

7  3>  2  0  0.1  5 

e  7  5, 4  5  2.6  5 

rapor  i  Hibbon 

1^2  4  7.2  5 

^0  3  2.0  5 

2  6^301.40 

nachlno  Parts 

4,6  6  83  0 

3kl  11^0 

46,321.20 

Repairs 

2,1  6  25  0 

1,862/47 

2  £i  1  6  5 .0  7 

Total 

2  0  6,8  6  0.6  7* 

182,62233* 

1^0  9  1.6  4  6,8  2* 

Deduct  loss  on 

Stands 

7  2  5^0* 

6  2  0.2  6* 

7,0  0  0.2  5* 

Gross  Earnings 

206^1  35J27* 

18^0020  7* 

£^0  9  1,6  4  6,8  2* 

Deduct  Expenses 

* 

«• 

it 

Selling  &  Distri- 
buting 

General  t  Admln- 
IstratlTe 
Machines  under 
Guarantee 
Machines ' DlsnantlAd 

7  7,567.20 

6  9, 4  6  0J3  2 

7  9,451J20 

2  4,300.28 

16^76150 

2  5  1.2  0  0.0  5 

4,25055 
1.260J37 

3^721.20 
1,0  0  7.6  0 

4  1.4  0  6.2  3 
12,6  8  7.7  9 

Total  Expenses 

10  7,3  7  8J3  4* 

9?. 9  5  05  2* 

1,0  8  4,7  4  5.2  7'' 

Net  Earnings 
ftrom  operations. 

961757X)3* 

89,05155* 

1,006,90155* 

o 

A 

Fig.  76 

Comparative  Statement  of  Earnings  made  with  an  adding  machine 
and  a  typewriter. 

186 


COST 


K    i:    E    PING 


SHORT 


CUTS 


COMPARATIVE  STATEMENT 

OF 

SELLING  AND   DISTRIBUTING   EXPENSES 

PARTICULARS 

TOTAL  CURRENT  MONTH 

COR.  PERIOD  LAST  YEAR 

JAN.  1   TO  DATE                             j 

AMOUNT 

I  TO  »»L£S 

AMOUNT 

.YOSALtS 

AMOUNT 

.  TO  S/U.tS 

cor-rissions 

* 

^ 

.. 

o 

Ifcchlne  Sales 
Rebnllt  Sales 
Foreign  Saleo 
tiachlne  Rentals 

11Q46530 

17,320.40 

16y4  62X)0 

762>i0 

9  9,2  4  3.4  5 

15,335.34 

iaC30.50 

7  2  2.4  4 

I,00a3^4.45 

1  53^45  2>»5 

1 5a23050 

7,335O0 

SALAHIES 

2^432>15 

2  1,16  5\3  4 

2  14,62350 

MACHII.-E  REPAIRS 

9,2  5  6.4  0 

7.94450 

8  9.4  5  2.30 

FREIGHT  &  EXPRESS 

5,6  7  5.7  8 

6  2  4 .4  0 
1  5  250 
3  7  5.8  0 

4,9  3  3.3  5 

1,2  5  4.30 
7  5O0 

8852 

6£34500 

41,23450 
1,4  2  3.4  0 
2,2  5  0.30 

DUTY 

~ra~Machlne8 
On  Pmtg  &  Stany 
On  Repair  Parts 

PRIOTIHG  and 

STATionsirr 

OFFICE  SUPPLIES 

1,60000 
8  9  2.7  5 

1.4  3  2O0 
7  5  OOO 

lSi345O0 
7,5  0  3.4  0 

POSTAGE 

1,43153 

1,243.^5 

13,5  2  3.4  4 

TELEGRAPH  etc. 

2  9  0.16 

24356 

1.845O0 

TPJIVELIIIG  EXP. 

1,2  4  1.7  5 

1.C5  35  5 

10,1120  0 

TAr^ES  &  IBS 

1,87557 

1.786O0 

18,5  5  5.3  3 

ADVERTISIMC 

4,275>»0 

'54  2  3>»0 

4^23050 

HALF  TOIIES  etc. 

5  3  250 

4  8  6.6  6 

4,2  4  5.6  5 

COHVEHTIONS 

6  9i.3  0 

8  2  230 

5^22050 

SALESMEH'S  SCHOOlJ 

43650 
4756 

5  2  1.3  0 
45O0 

2,74450 
522O0 

KAGAZIHES 

o 

SALESIEH'S   PRIZES 

6  3  3.4  0 
7855 

4  2  2J0 
50O0 

6,3  4  55  0 
73450 

STREOPTICAD 

inSCEI,LAIIE0U3 

4  21.3  4 

252.45 

3^503/45 

TOTALS 

196^174^1* 

1  75k314/41* 

l,868il02J7* 

Fig.  77 

Another  machine-made  statement  that  is  exceedingly 
valuable  to  the  management. 


COST 


KEEPING 


SHORT 


CUTS 


o 

INVENTORIES 

DETAILS 

MONTH   tNOlNC 

COR.  PERIOD  LAST  YEAR 

AS  A 

T  DEC.  31.  1908 

OUANTITY 

v»Lue 

QUANTITY 

VALUE 

QUANTITY 

VALUE 

Faotory  Style      3 

* 

.2  0 

3,4  4  6.2  0 

.1   6 

a?  5  6.9  6 

.17 

2.9  2  9.2  7 

4 

.1  6 

^485.1  2 

.13 

2,C19.16 

.14 

2. 1  7  4  .4  8 

6 

.1  8 

2;9  5  8.12 

.15 

2  4  6  5 .1  0 

.1  6  " 

2, 6  2  9 .4  4 

"           6 

.19 

3v2  7  3.8  9 

.2  0 

3,4  4  6.2  0 

.21 

3,6  1851 

"          7 

.2  3 

4,14700 

.2  0 

3,770.00 

.2  1 

3,9  5  65  0 

"           7 

.21 

3i677.31 

.16 

2,8  0  1.7  6 

.17 

2,9  7  6.6  7 

9 

.7  4 

1  8,9  6  8.4  2 

£5 

l'i,C9  0.15 

.6  3 

\l  6,1  4  8.7  9 

"       11 

31 

8^9  10.3  3 

.3  0 

8,6  2  2.9  0 

.3  2 

9,19  7.7  6 

"      ^3 

.12 

3i  19  6.8  0 

.12 

3.1  9  6.8  0 

.15 

3,9  9  6.0  0 

"      .15 

.46 

13^9  01.6  6 

.3  3 

9,9  7  2.9  3 

.4  2 

12.692.82 

Total  Paotory 

2.7  9* 

64,964.65* 

2.3  0* 

5  3,1  4  9.9  6* 

258* 

6  0,3^2.4  4- 

* 

* 

« 

«- 

~ 

V 

Agenoles  Style    3 

4.9  7 

8  5,  6  3  8 .0  7 

3.8  8 

6  6,8  5  6.2  8 

3.9  2 

6  7,5  4  55  2 

4 

2.8  5 

4  4,266.20 

25  0 

3  ae  3  0.0  0 

2.4  6 

3  6.208.72 

6 

4.4  0 

72,309.60 

3.7  6 

6  1,7  9  1.8  4 

3.61 

6  2,61  354 

6 

4.3  5 

74,954.85 

3.2  3 

5  5,6  5  6.13 

3.3  0 

5  6,86  2.30 

"        7 

17.6  0 

3  3  1,7  6  0.0  0 

16.6  6 

314,04  lOO 

17.2  2 

324,597. 0  0 

7 

18.7  5 

3  2  6^3  31.2  5 

17.6  7 

3  0  9,4  19.3  7 

18.11 

3  1  7, 1  2  4 .2  1 

"       9 

40,42 

X03^C85£6 

3  8.8  7 

996,354.71 

3  8.4  4 

9  8  5,33252 

"    .11 

1  1.3  5 

326^233X35 

12.4  4 

3  5  7,562.92 

13.2  2 

3  7  9,9  8  2.4  6 

"    .1  3 

3.7  0 

9^568.00 

3.7  7 

10Q432.80 

4.11 

10  9,4  9  0.4  0 

"    .15 

1  8.6  6 

5  6  3,9  2  3.8  6 

16.3  3 

4  9  3i  5  0  8.9  3 

1455 

4  3  9,7  155  5 

Total  Agenolea 

127.05* 

2,962070.74* 

119.11* 

2,794,4  5  3.98* 

1  19.14* 

2,7  8  1.4  7  2.2  2*- 

llodela 

.6  3 

19,7  5  25  5 

51 

15,61  2O0 

55 

16,91350 

o 

Finished  Parte 
Vork  In  Frooeee 
Raw  Stock  &  Sup, 
Small  Toole  etc. 
Paper  S>  Rlbbone 
So  rap 

# 

16  0,0  5  2.0  0 

153,201.25 

141,32650 

1^3  5  5.7  5 

2  4,302.12 

1,87550 

15£i2  14.12 

14  7,6  2  1.3  0 

13  5,406.25 

14,22150 

2  0,1  2  1^0 

1,25000 

15  7,333.25 

15  1.22350 

1  3  6,  C  2  4  .2  2 

15,C1  0.00 

2  0, CI  2.2  0 

1. 3  1  1 .3  3 

Total 

4  9  6,113.12* 

472^63457* 

4  8  0,9  1450*' 

Grand  Total 

I3  0v4  7~ 

2i5  4£i9  0  0,9  6* 

121.92* 

^337,05051* 

12  2.27* 

2^3  3  8,7  2  2.6  6*' 

Fig.  78 

The  quantity  and  price  of  the  numerous  items  going  into  the 

inventory  can  be  quickly  and  accurately  recorded 

with  the  Burroughs  Adding  Machine. 


COST    KEEPING    SHORT    CUTS 

very  few  minutes.     If  the  growth  is  healthy,  well  and  good,  A 
but  if  there  is  a  dropping  off  in  any  line,  it  is  shown  up  gystem 
immediately. 

Figure  76  is  a  comparative  statement  of  earnings, 
which,  for  obvious  reasons,  contains  fictitious  amounts. 
It  is  in  the  nature  of  a  general  recapitulation  and  is  com- 
parative, showing  the  resiilts  for  the  current  month  and 
same  month  the  previous  year. 

The  comparative  statement  of  Selling  and  Distribu-  Compari- 
ting  Expenses  in  Figure   77  is   a  general  summary   of  ^^"^ 
expenses  of  all  kinds  for  the  year  to  date,  the  current 
month  and  the  corresponding  month  the  previous  year. 

The  monthly  inventory  of  machines  in  Figure  78 
shows  the  quantity  of  the  different  styles  on  hand,  both 
in  the  factory  and  in  the  agencies,  together  with  the  value. 
The  same  information  is  also  given  regardmg  the  inventory 
for  the  corresponding  month  the  previous  year,  and  the 
number  and  value  of  machines  in  factory  and  agencies  at 
the  end  of  the  previous  year. 

This  record  is  a  handy  guide  for  the  distribution  of    - 
machines  between  factory   and   agencies,   as   well   as   a 
comparative  record  of  this  distribution. 

Such  records  are  valuable  to  us  and  emphasize  the  fact 
that  with  an  adding  machine  it  is  possible  to  prepare 
statistics  of  this  nature  with  very  little  extra  expenditure 
of  time  and  labor. 

Any  manufacturer  would  like  to  have  similar  informa- 
tion about  his  business,  but  deprives  himself  of  it  because 
he  thinks  it  costs  too  much,  and  his  conclusions  are 
correct  unless  he  is  operating  an  adequate  cost  system. 

A  cost  system  of  the  right  kind,  however,  automatic- 
ally produces  the  vital  information  so  that  the  preparation 
of  summaries  and  comparative  statements  of  costs,  etc., 
is  merely  a  recapitulation  and  tabulation  of  the  items 
with  a  machine. 

180 


COST    KEEPING    SHORT    CUTS 


A        When  a  machine  handles  the  details,  it  is  possible  to 

System  operate  a  cost  system  at  far  less  cost  than  the  value  of  the 

information  given.     Without  a  machine  this  is  practically 


impossible. 


190 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.00  ON  THE  SEVENTH  DAY 
OVERDUE. 


*^m 


DEC  17  imb 


8Jan'56FW 


JrtNO     1Q5c 


v^ 


m 


ItkWCO  LO 


JAN  film 


■  ^Wf^^: 


^^C^gtJSO 


LD  21-100m-7,'40 (69368) 


i 


SAYLORD    BROS. 

MAKERS 

5YRACl!'^E,  -  NY. 

PAT     ja;.     21  ,  '900, 


.#^ 


?'vfev.a 


X:.-: 


■■•'V'i¥!th'i 


